Planning for the High Costs of College

In 1998 the average annual cost for a four-year private college was just over $21,000. By 2008, the cost rose to over $34,000. The cost of a public college is less, but can still certainly run upwards

First, it's important not to panic. The figures above do not take into consideration grants, scholarships, financial aid or other types of subsidies. These are all means of helping millions of students get through college, along with student loans and part-time jobs.

Below is an overview of the various ways you can approach paying for your children's college education:

Savings plans: The earlier you start, the more you can let your money grow. You can use a new state-sponsored 529 College Savings Plan for tax-free growth or simply start a college fund on your own. Either way, you need to be diligent and invest regularly. Start with more high-risk, high-reward investments, and once your child reaches high school, you should become more conservative in your investments.

Zero coupon bonds: If you have the money, buy several of these deep discount bonds, which are locked in at a good rate, when your child is young. Then let them grow until he or she reaches college age. If you ladder these safe investments, you can use them to pay for a portion of each year's tuition as they come due at periodic intervals. You will receive tax breaks if you buy them in your child’s name. It can work against his or her opportunity to qualify for financial aid, however.

Financial assistance: Contact the financial aid office at the colleges your child is interested in attending and apply. Remember that financial aid is heavily contingent on the money in your child's name. It is expected that 35 percent of their money will be used for college, where only 5 percent of your money is anticipated to be earmarked for college.

Federal Pell Grants: These are grants that do not have to be repaid. They are awarded based on need, cost of school and whether the student is attending full or part-time. If you are interested in applying, contact the financial aid office of the school your child is looking to attend. These grants provide just under $3,500 a year at most.

Scholarships: From academic to athletic, there are numerous scholarships available. Billions of dollars are given out annually from groups, companies, organizations and individuals for scholarships. You can find scholarship information from major companies or organizations online. There are also many online scholarship sites. Be careful, however, because some have already been shut down as fraudulent and others may still exist.

Student loans: Popular student loans include the Federal Perkins Loan for students with financial needs and the Stafford Loans, which can be either subsidized (based on need) or unsubsidized (not based on need), whereby you will be charged interest on the loan. Federal PLUS loans are not need-based and let parents borrow up to one year's total school costs. These can be obtained at banks.

For more information on student loans, check out FinancialAid.com or NextStudent.com.