Beating the high cost of college

It’s that time of year again. High school seniors are eagerly awaiting thick packets with letters of acceptance from the colleges and universities of their dreams. It can be an exciting time of year for a 17-year-old. It can also be a time of worry for his or her parents.

With top private colleges charging as much as $55,000 to $60,000 a year for tuition, room and board, and state schools around $20,000 a year, many moms and dads are panicking –– and rightly so.

There are no easy ways to fund a college education these days, particularly for Long Islanders. The Free Form for Federal Student Aid, in place since 1967, is skewed against high-cost regions like the Island. Let’s face it: $80,000 here isn’t the same as $80,000 in, say, Arkansas, where money goes a whole lot further and property taxes aren’t the bane of people’s existence. Yet the federal financial aid formula looks only at parents’ annual income, without indexing it for regional cost differences.

Don’t expect the formula to change anytime soon –– if ever. Instead, be prepared.

Since the Dow hit its nadir of 6500 in March 2009, its value has doubled, recently surpassing the 13,000 mark. That’s been good for college savers. If you haven’t already done so, you should consider opening a 529 college savings account, which allows investors to earn tax-deferred income through a mix of stocks and bonds. Profits are taxed only when your child heads off to college –– and at his or her minimal rate. At the same time, a 529, which can be opened with as little as $25, gives you a deduction on your state income tax. If you invest early, when your children are young, your 529 account has time to earn compound interest and grow.

Encourage your children to work hard in school. U.S. News & World Report posts a long list of colleges on its website that provide grant money for students who get in to ensure that they’re able to attend. They’re called “full-need” schools. The thing is, they’re the most competitive colleges in the country –– Harvard, Columbia and the like. To have any chance of being accepted at one of them –– and getting a grant –– your child has to be a top student.