We've all heard that the annual tab at some schools now tops $30,000. But here's the flip side: Thanks to over $100 billion of financial aid available each year, most families don't pay the (astronomical!) sticker price. Your piece of the money pie may be waiting.

By Pam Kramer; Illustration Leigh Wells

The High Price of Tuition

In a perfect world, all parents would stop on their way home from the hospital to open a college savings account for their newborn. Eighteen or so years down the road their consistent monthly contributions — sizably supplemented, thanks to the miracle of compounded interest — would easily cover the cost of tuition.

Except that in the real world, if you're like my husband and me, paying for college seemed light-years away, making it easy to postpone putting money aside — especially when you had bills up the wazoo for stuff like daycare, braces, music lessons, and camp. But now high school is winding down. Higher education is around the corner and you're coming up on pay-the-piper time. And you're stressing. To put it mildly.

Good news: When all is said and done, lots of families don't end up having to pay the full fee in cash. From grants to loans to part-time jobs, there are many ways to cover costs. Easy? No. Possible? Yes, with some inside info.

How to Cover College Costs

1. Search thoroughly for "free" money. Scholarships aren't just for A+ students or star athletes, says Kelly Tanabe, coauthor of 1001 Ways to Pay for College (SuperCollege). For instance, participation in community service, religious affiliation, and artistic talent are also frequent criteria.

Encourage your teen to start searching during her junior year to ensure she won't miss any deadlines, often in the fall of senior year. "Every student should apply for at least 10 scholarships to increase the odds of winning one or two," says Lynnette Khalfani, author of Zero Debt for College Grads (Kaplan Publishing). Kids should visit FastWeb.com and CollegeAnswer.com, Internet sites that will generate lists of possibilities based on intended major, special talents, GPA, and other info. It's also smart to ask school guidance counselors about scholarships offered by area businesses, churches, and community and service organizations. Local awards are generally easier to win than national ones because fewer people compete for them.

2. Fill out the FAFSA ASAP. The Free Application for Federal Student Aid (FAFSA) is used to determine eligibility for all federal aid, including Pell grants, loans, and work-study programs, plus many state- and college-based initiatives. By all accounts the six-page FAFSA can be tricky — okay, exasperating — but it's a must in order to apply for need-based aid, determined strictly by a family's income and assets or lack thereof. (President Barack Obama pledged during his campaign to eliminate the FAFSA form, but whether that will happen remains to be seen.) The federal deadline is always June 30, but many state agencies and colleges require the form be completed as early as March 1. Some aid is given out first-come, first served, so later filers could potentially miss out on money, says Lee Harrell, assistant vice president of financial aid at Ohio Wesleyan University.

To fill out the FAFSA online, go to fafsa.ed.gov. For a paper copy, check the library or call 800-4-FED-AID. You will need your driver's license, bank statements, mortgage data, and the previous year's tax return to complete the form. If you haven't done your taxes yet, estimate your numbers based on the prior year's return rather than wait, suggests Harrell. You can update the figures later. Pro help with the FAFSA — starting at $80 — is accessible at fafsa.com. If your child isn't a senior yet but you would like to get a sense of what's involved, go to fafsa4caster.ed.gov.

3. Compare aid packages. Every school that admits your kid will review your FAFSA and issue an award letter indicating the types and amounts of aid it can offer. Obviously, scholarships and grants are most desirable because — unlike loans — they don't have to be repaid. For help comparing aid packages, use the Award Letter Comparison Tool at FinAid.org.

4. Push for a better deal. If you feel a package contains too many loans or if the amount the school expects your family to contribute doesn't reflect extenuating circumstances, such as job loss, ask for a reassessment. "Financial aid officers hate the word 'negotiate,' but they usually have a fair amount of leeway when determining how much aid a student receives, especially if the school really wants your child," says Khalfani. Be clear about why you can't afford to pay and exactly how much assistance you need.

If your child gets a generous aid package from a college that isn't her top choice, leverage that offer to win more aid from the place she really wants to attend. Write a letter to her desired school explaining why she would rather go there and why the cost is prohibitive. Talk in the language financial aid officers understand — numbers. (At this point, it's not about how wonderful your child is.) Make sure to include a copy of the other school's award letter.

5. Go where the money is. Some schools are able to be more generous with merit-based aid, usually because they have large endowments or are actively trying to attract top-tier students in an effort to inch their way up the college rankings ladder, says author Lynn O'Shaughnessy. To up your child's chances of receiving money, apply where she would be likely to fall within the top one-third or one-quarter of the applicant pool, says O'Shaughnessy. You can get a good idea of how her academic record compares by looking up a school's range of test scores and average GPA at collegeboard.com. Also keep in mind that although it seems counterintuitive, high-priced private schools can actually cost less than cheaper state schools in the long run, simply because private schools generally have a much deeper well from which to draw when awarding financial aid.

6. Agree on a split decision. If your son's first choice is a pricey big-name university, broach the idea of starting out at a community college for a year or two, then transferring to get the designer degree for far less money, suggests Robert Brokamp, who writes about money management. Contact the desired school beforehand to make sure it will accept transfer credits and to find out whether there are any specific course or GPA requirements that you should know about.

What Not to Do

Sometimes a parent's best intentions — like wanting to help your kid go to the college of her dreams at any cost — can lead to trouble in the future. Whatever you do, don't:

Clear out your retirement funds.

There are numerous ways to pay for college but limited options when it comes to funding retirement. "If you reach 65, want to quit working but don't have enough cash set aside, there are no low-interest retirement loans or scholarships to help pay your bills," says Robert Brokamp, author of The Motley Fool's Guide to Paying for School (Motley Fool).

Stash money in your child's name.

Saving is super, but setting up a college savings account with your child's name on it may actually reduce her aid opportunities. "In the federal financial aid formula, parent assets are assessed at no more than 5.64 percent, but a child's money is assessed at 20 percent," says Lynn O'Shaughnessy, author of The College Solution (Financial Times Press). Keep college savings in your name, or, better yet, save in a tax-deferred custodial 529 college savings plan or prepaid tuition plan. If money has been saved in your child's name and she's planning to enter college this fall or next, it's too late to move the money since aid calculations are based on the prior year. If she's a sophomore or younger, consider transferring her funds into your account or a custodial 529 plan, which will be regarded as a parental asset come July 2009.

Assume you don't qualify for financial aid.

You might think you make too much money or have too many assets to be eligible for assistance and decide not to bother filling out the Free Application for Federal Student Aid, which can be a hassle. Still, file the FAFSA even if you think aid is a long shot because it's the gateway to all federal and most state- and college-based help, including federal loans. Schools take into account factors you might not realize, like having more than one child in college in the same academic year and the number of years until your retirement. Fill out the form.

Buy into the idea that a high-cost education always leads to a better-paying job.

"Attending a top school is prestigious, sure, but it doesn't always translate into larger paychecks," says Brokamp. Fact is, a future teacher with an education degree from an Ivy League institution isn't guaranteed to earn more than one with a similar degree from a state U. If your child has her heart set on a pricey school, by all means let her apply — because a good aid award could make it affordable. But also insist she apply to less-expensive schools, in case you end up having to cover costs and will need to rely on loans to do so.

The Lowdown on Loans

For an increasing number of students, borrowing to help cover college costs is a fact of life. Loans now make up more than half of typical aid packages, according to the Center for Economic and Policy Research. Over the past decade debt levels for graduating seniors more than doubled, from $9,250 to $19,200, a 108 percent increase (58 percent after accounting for inflation), according to the Project on Student Debt, a nonprofit advocacy group. Parents are borrowing more too, via loans or even credit cards. What you need to know:

Try for federal loans first.

Government-backed loans typically offer better terms than private ones, including capped, fixed interest rates, extended repayment plans and less stringent approval requirements, says Mark Kantrowitz, publisher of FinAid.org, an online resource for financial aid. After you complete the FAFSA, your teen's school will send a letter indicating your eligibility for federal loans. There are three different types.

Perkins Loans These are subsidized loans made through participating schools to kids with exceptional financial need. They are the best student loans out there, with interest paid by the federal government while the child is enrolled in school. Each school has a limited pool of funds available. Max loan amount for undergrads: $15,000.

Stafford Loans (subsidized and unsubsidized): Subsidized Stafford loans are based on need, with interest paid by the government until your child leaves college. Unsubsidized Stafford loans are available to most students and begin accumulating interest charges as soon as money is disbursed. Max loan amount for undergrads: $20,000.

PLUS Loans They are the financial responsibility of the parent, not the student. They are not based on financial need, and a poor credit history can impact loan eligibility. Payback (including interest) begins 60 days after funds are disbursed. Max loan amount: Total cost of attending the school less any financial aid the student receives.

Shop for a lender.

Federal loans are available through colleges, private lenders, and some state guaranty agencies. The government sets the rates that can be charged, but some lenders discount those numbers to attract business (and hope to make up the shortfall with increased volume). Most schools provide a lender list as a service but will not offer specific recommendations, to avoid a conflict of interest. Your state guaranty agency can also help you locate a lender. To find your state guaranty agency, visit ed.gov/erod (click on State/Territory Search) or call 1-800-4-FED-AID. If federal loans are not enough to cover college expenses or you do not qualify for a parent PLUS loan, you or your child can take out private loans, which are often marketed by mail and on campuses. Private loans should be your last choice because, unlike federal ones, they have variable rates that are not capped by Uncle Sam. Interest also begins accumulating when funds are disbursed. If your child needs a private loan, make sure he has a cosigner to increase his chances of getting the best terms.

Watch the bottom line.

It's easy for students to get neck-deep in debt. As your teen evaluates school options and financial aid offers, remind her that loans have to be repaid, and let her know approximately what her loan payments will be after she graduates. For example, $20,000 in loans at 6.8% interest (the current rate for unsubsidized student Stafford loans) will cost $230 a month for 10 years. You can find calculator tools at FinAid.org and other college Web sites.

Recession 101

Naturally, the economic crisis has parents more freaked out than usual about paying for college. These are scary times, but higher education is still within reach, says Cindy Bailey, a senior policy analyst for education finance at the College Board, a nonprofit that manages standardized exams. Despite the cash crunch, schools will still be doling out aid, says Bailey. "There will be money available because students need it and institutions are committed." Her timely tips:

Complete all financial aid-related paperwork early and accurately.

This is especially critical now because more families than ever will be applying, including many that would not have applied even just a year or two ago. (As of February 15, 2009, the Department of Education had received 20 percent more FAFSA forms than by that date last year.) Pay close attention to deadlines and don't leave any fields on the form blank.

Don't believe the hype about loans not being available.

"I predict there will be more borrowing, especially among families who thought they wouldn't need to," Bailey says. "But despite media reports that the student loan pool is drying up, the Department of Education has been very resourceful about creating liquidity, so finding funds won't be an issue." However, because of the fiscal fiasco, there are fewer private loan providers, meaning fewer options when it comes to comparison shopping for the most favorable terms.

Adjust expectations.

"Even if it wasn't part of the plan initially, teens may have to pitch in, like by getting a part-time job," says Bailey. Stay focused on the big-picture goal — getting a degree.— Celia Shatzman

Originally published in the May 2009 issue of Family Circle magazine.