|Resume | Daily CommentaryContact Us | Site Search  | Home Page |

FOUR YEAR COLLEGE COSTS

(Smart Money 12/96) Take a look at these Four Year college costs and then tell me why you had kids. Includes tuition and fees, room and board, and other expenses
Years Until College Public College* Private College** Elite College**
1 $43,561 90,973 129,372
2 45,703 95,052 135,356
3 47, 956 99,317 141,623
4 50,326 103,780 148,185
5 52,818 108,447 155,057
6 55,440 113,330 162,253
7 58,198 118,439 169,790
8 61,100 123,783 177,683
9 64,153 129,374 185,949
10 67,366 135,224 194,607
11 70,746 141,345 203,675
12 74,303 147,750 213,173
13 78,047 154,452 223,121
14 81,988 161,464 233,542
15 86,136 168,803 244,457
16 90,502 176,483 255,891
17 95,098 184,520 267,868
18 99,936 192,931 280,416

* Assumes 5.5% annual increase in tuition and fees, 5.6% increase in room and board and 3% increase for all other expenses.

** Assumes a 5% annual increase in tuition and fees, 3.8% increase in room and board and 3% increase for all other expenses.

College Costs, T ROWE PRICE, 12/97

Compare these costs to just one year ago above.

Years until student begins college School year Projected four year total- public Projected four year total- private Monthly savings- public Monthly savings- private
1 1998 $45,569 $96,957 $3,636 $7,736
2 1999 47,847 101,805 1,833 3,900
3 2000 50,239 106,895 1,231 2,620
4 2001 52,751 112,240 930 1,979
5 2002 55,389 117,852 749 1,593
6 2003 58,158 123,745 628 1,336
7 2004 61,056 129,932 541 1,151
8 2005 64,120 136,428 476 1,012
9 2006 67,326 143,250 425 904
10 2007 70,692 150,412 384 817
11 2008 74,226 157,933 350 745
12 2009 77,938 165,830 322 685
13 2010 81,835 174,121 298 634
14 2011 85,296 182,827 277 590
15 2012 90,223 191,968 259 551
16 2013 94,734 201,567 243 517
17 2014 99,470 211,645, 229 487
18 2015 104,444 222,228 216 460
19 2016 109,666 233,339 205 435
20 2017 115,150 245,006 194 413

Assumes 5% annual increase and uses the College Board base which includes tuition, room and board, transportation, books and other expenses; public- $10,069; private- $21,424. In state residency is assumed for public schools.

Savings assume that investments are made at the beginning of each month at an 8% annual return and that there are no additinal investments or earnings once the child starts college

RICHER/POORER: (WSJ 1997) More of the rich are going to college and few of the poorer. The split between the haves and have nots is growing larger. A lot of this will hit the fan by 2010.

% of 18 to 19 year olds enrolled in college by income
1977- 1979 1991-1993
Richest 25% 68.7% 75.4
Middle 50% 45 49.9
Lowest 25% 26.3 25.5

COLLEGE DEBT: (1998) A survey by Nellie Mae, the largest nonprofit provider of student loans in the country stated that the average total debt for students was $18,800 in 1997 compared with $8,200 in 1991.

In 1981-82, federal grants made up 54.6 % of student financial aid, and federal loans 41.4 %. By 1995-96, federal grants made up only 39.7 % of financial aid, and federal loans 58.9 %.

The survey found that the average debt for students in public four-year colleges was $13,000 compared with $17,500 for those who went to private colleges. Those in graduate schools had debts of $24,500 and $48,500 who went to professional school

COLLEGE COSTS: (1999) Unfortunately, college costs are increasing about twice that of the CPI at about 4% for public schools and 5% for at private schools. Average tuition at public schools is $3,243 and $14,508 by private schools. Room and board are increasing at between 3% and 5%. But all this is simply the trend started in the 1980's when tuition was increasing at twice the CPI. You may therefore wish to consider giving away your children now. I think there is a law that allows a tax deduction.

COLLEGE: Stafford Loans- Some banks will discount .25% if payments are debited directly from a bank. Others offer a 2% discount after the first 48 payments if made on time. Some lenders will also rebate all or part of the 1% guarantee fee and 3% origination fee. Check around.  

MORE COLLEGE: (1999) Are you sure you wanted kids? A new report by the Education Resources Institute and The Higher Education Policy showed that the costs for full time students without financial aid (includes tuition and room and board for the 1997- 1998 school years):

Two year public community college- $7,265

Public four year college- $10,889

Private Four year college- $19,443

Maximum student grant in 1997/1998- $3,000

The average Pell grant award fell by 23% over the last twenty years while the costs for college rose by 49%. Family income rose just 10%. About 3.6 million of the 14 million college students receive Pell grants.

COLLEGE TUITION: (Or why young marrieds consider sterilization): While the average rate of inflation has stayed low, college inflation is almost double or more averaging between 3% to 5% depending on the type of institution. Annual total fees are estimated to be $48,000 annually at Harvard this fall with tuition alone at $32,164. The College Board indicates that $60 billion in financial aid was available to students lat year but 60% of that was in loans. Students currently graduate with an average debt of between $12k- $14K.

GOING UP- (College Board 2000) "The cost of going to college increased less than 5% in 1999 year, the smallest hike in the last four years." But don't be too complacent- college inflation has been higher than health-care costs and consumer prices and still are. "The board says tuition at public and private institutions increased between 3% and 5% in 1999. Those increases had averaged 5% for each of the past several years."

Now aren't you sorry you had children? For the 1998–99 academic year, average prices for undergraduate tuition, room, and board were estimated to be $7,093 at public colleges and $19,410 at private colleges, according to the National Center for Education Statistics. According to the1997-98 College Board's Annual Survey of Colleges, " ... undergraduates at American colleges will pay, on average, approximately 5 percent more this year than last in tuition and fees at four-year institutions, and from 2 to 4 percent more at two-year institutions."

Funding Sources for College

5/21: EDUCATION IRA LINK: The IRS bulletin 97-60

Are you sure you want children: A child born today (2000) can expect to cost $225,000 for private college in 2018 and about half that for a public school.

In 1999/2000, the increase in college costs was "only" 5%- the lowest rate in four years. The College Board indicates that a private four year scholl will run $22,533 with tuition and fees representing $14,508. A public scholl will run $10,458 including $3,243 in tuition and fees. For public out of state schools, add $5,228 in tuition and fees.

However it says that the majority of all students nationwide attending 4 year schools will pay less that $4,000 annually for tuition and fees.

Going up: (College Board 2000) One year of tuition at a four-year private college cost $15,380 last year, and a year at a public college cost $3,356

College: (2001) using the 1998-1999 College Board average costs as a guideline: $10,458 for a public college and $22,533 for a private college or university.

College costs from Stephen Advokat (2001)When schools try to determine how much you should contribute to college, they concentrate on your income and savings. You should make those look as small as possible. How?

Don’t sell stocks and property the year your child applies. Those one-time capital gains will appear as ordinary income on your tax return and inflate your real annual income.

Contribute as much as possible to retirement plans, such as 401(k)s and IRAs. (And if your children have earned income, consider setting up IRAs for them, also.) Many schools do not consider these assets when determining financial need.

If possible, defer raises or bonuses until after your child starts school.

Oddly enough, this may be a good time to make certain pricey purchases, like needed car repairs. Schools also scrutinize your savings. If you think you’re a good candidate for grant money, reducing your savings accounts could make sense.

Invest in your name, not your kid’s. Schools expect as much as 35% of a child’s savings to be used for school before you have a "financial need." That compares to only 5.6% of parental assets.

Open an Education IRA. Even if your child will become a freshman next year, your senior class bills are still four to five years away, enough time for a conservative Education IRA to grow a little, and then be withdrawn tax-free!

College savings: (AEGON 2001) One-third of American parents have not started a college savings program for their children, according to a national survey of parents with children under age 18. The majority, or 66 percent, of these parents said they can't afford to do so. Sixty-two percent of parents who are not currently saving said they expect to pay the tuition expenses while their children actually attend college.

The survey also found that 25 percent of parents expect their children to pay for college themselves, and 17 percent anticipate other relatives will cover the tab. Just one in 10 parents said they already have enough money saved for their children's higher education.

More than three-quarters, or 77 percent, said they wish they knew more about how to invest for their children's college expenses. Eighteen percent worried about the taxes they will have to pay on the money they saved. Another 18 percent worried that their savings will be useless if their children do not attend college.

parents expect to pay about 60 percent of their children's college expenses, with one-quarter anticipating they will fully fund their children's college costs. On average, parents believe they must save approximately $45,500 to pay for one child's tuition over four years

College loan deferment (USA Today 2001) If you have a federal Stafford loan, the most common type of federally funded student loan, you may be able to put off making payments for up to 3 years. Deferments are available for borrowers who are unemployed, returning to school or facing economic hardship.

If you have a federally subsidized Stafford loan, the government will pay the interest on your loan while it's in deferment. Subsidized loans are typically given to students who demonstrated economic hardship when they applied for the loan. If you have an unsubsidized Stafford loan, the interest will continue to accrue while you're delaying payments.

Forbearance is often extended to graduates who don't meet the standards for deferment but are still having a hard time paying off their loans (up to 12 months)

Consolidating may also reduce the interest you pay on your loans. When you consolidate, you lock in the weighted average of all your student loans, rounded up to the nearest one-eighth of 1%. On July 1, the interest rate on federal Stafford loans in repayment that were issued since 1998 dropped to 5.99%. If the weighted average of your loans is 5.99%, consolidating will lock in a 6% rate.

College costs: (NY Times 2002) In an annual survey released in October, the College Board found that the average in-state tuition and other fees for public four-year colleges rose 7.7 percent this year, to $3,754 a year, while tuition and fees at four-year private colleges rose 5.5 percent, to $17,123 a year.

The Parent Loan for Undergraduate Students program (PLUS), lets parents borrow up to all the cost of a college education, with no collateral. The current interest rate is 6.79 percent, the lowest since 1994.

For students, the most widely used plan is the low-interest, federal Stafford Loan program. Eligibility is determined by the school's financial aid office. In the subsidized version of these loans, based on need, the government pays the interest while students are in school. In the unsubsidized version, students pay all the interest, although they can defer payment until after graduation. The current rate is 5.39 percent.

College financial aid consistency (WSJ 2002) Last summer, 28 schools -- including Duke University, Cornell and the University of Pennsylvania -- decided on common rules for allocating financial aid in an effort to reduce variation from college to college. The solution: a "consensus" approach for valuing family need. For example, some colleges heavily penalized families that had savings in the student's name. Now those savings will be treated the same as any other family assets.

It may be tougher for more affluent students to negotiate aid at colleges that can cost as much as $36,000 a year. But it should be better for lower or middle income parents.

529 PLANS: Keeping the Promise of Section 529 a Reality by Lisa Nachmias Davis, Esq. (2002)

See also Financial Aid

"Section 529 Plans," also known as "State-Sponsored Qualified Tuition Programs," are offered by all 50 states and, for the most part, are available to state residents and non-residents alike. These plans, which permit tax-deferred and often tax-free savings, are billed as the best way to save for college, a moral obligation for every parent and an ideal gifting tool for every grandparent. To some extent, this is true. However, if the generous grandparent later requires Medicaid, what seemed to be a solid plan for funding college may prove to be an illusion--without careful advance planning.

Section 529 of the Internal Revenue Code makes it all seem so simple. A contributor sets up the account in a state's 529 plan and names a beneficiary. No tax is paid as the account funds grow or generate income. When the beneficiary needs the funds to finance higher education, the account owner authorizes their release. No tax is paid on distributions for tuition, room, board, and certain other expenses. The account owner can elect to name a new beneficiary for any remaining funds, or instead, can elect to have the funds revert, subject to a 10% penalty and payment of tax on deferred income. Meanwhile, the donor incurs no gift tax upon funding the account, and the funds are not included in the account owner's estate at death.

In short, investment in a 529 plan account makes enormous sense purely as an investment strategy. It's hard to argue with tax-free compounding followed by tax-exempt distributions. Even if the eventual distributions don't qualify as tax-exempt, and even if they are subject to the 10% penalty, this may not be a terrible price to pay for years of tax-deferred growth.

The benefits are not limited to the income tax arena. Contributions to a 529 plan account qualify as "present interest" gifts so that the annual exclusion for gift tax purposes applies despite the fact that funds will only be released to the beneficiary's use at a future date. The donor can even "bunch" five years' worth of annual exclusion in the first year (actually, any gift over the one-year annual exclusion is averaged over five years) to start tax-free growth sooner and to remove funds from the donor's estate sooner.

Despite being treated as a gift to the beneficiary, however, the account is not considered the beneficiary's asset for financial aid purposes. This is important because, in determining a student's financial "need" for purposes of accessing other financial aid, 35% of a student's own assets are counted (as contrasted with 5.6% of a parent's assets). Now that qualified distributions are tax-exempt, even distributions may be disregarded rather than being treated as the student's "income" for purposes of the "financial need" computation, as was formerly the case. Of course, financial aid needs assessment criteria are subject to change, and distributions may well reduce "need" whether or not they are taxable.

Most unusual, the 529 account is not included in the account owner's estate for estate tax purposes even though the account owner retains substantial control:

(1) If the account owner doesn't like the performance of the account, (s)he is allowed to switch to a different account within the same plan or another plan, once per year.

(2) The account owner can change the beneficiary.

(3) Only the account owner can authorize distributions from the account, giving the account owner veto power over the beneficiary's educational choices.

(4) The account owner can get the money back, subject to the 10% penalty and liability for income tax on the deferred income.

It is the last category--the ability to recover the fund assets--that can cause problems. Although as yet we've seen few reported instances of a state Medicaid agency claiming that these accounts are "available" assets to the account owner, this may only be a matter of time. Certainly, IRAs are considered available assets in many states despite the 10% penalty (for those under 59-1/2) and the income tax payable upon withdrawal. It seems reasonable to infer that the same approach will be applied to 529 plans unless a legislative remedy directs otherwise.

A few states have chosen to include creditor protection features in their 529 plans, but these are in the minority (to date, only Ohio, Pennsylvania, Alaska, Colorado, Kentucky, Louisiana, Maine, Nebraska, Tennessee, Virginia and Wisconsin). And the Federal Bankruptcy statutes were amended to exclude from the bankrupt's estate contributions to 529 accounts made two years prior to filing. ($5,000 is protected if contributed between 1 and 2 years prior to filing.) Nevertheless, no state appears to exclude 529 plan accounts from consideration as "available assets" for purposes of Medicaid eligibility. For that matter, the limited protection for 529 accounts in bankruptcy suggests some unwillingness to shield these funds from the claims of the donors' unsatisfied creditors, and one is likely to find even more sympathy for cash-strapped state Medicaid agencies.

Assuming 529 plan accounts will be treated as assets for Medicaid eligibility purposes, it is also conceivable that Medicaid agencies would treat as a disqualifying transfer any distribution from a 529 plan on which a Medicaid applicant is or was the "account owner." Practitioners confronted by this scenario may wish to review the legislative history behind the creation and expansion of 529 accounts in order to make an effective "public policy" argument should a Medicaid agency take this position.

Surely, the only thing worse than spending your entire life savings on the cost of long-term care is having to raid the college fund you'd "given" to a grandchild on the very eve of his or her college education. What, then, is a grandparent to do?

It isn't clear whether and when the grandparent "account owner" could simply transfer ownership status to a third party without also triggering a Medicaid transfer penalty. Although this shouldn't be deemed a gift under the tax laws, this does not necessarily mean it couldn't still be a transfer according to the Medicaid laws. Under Medicaid eligibility principles, surrendering "account owner" status logically would be treated as the transfer of a valuable right. This even assumes that such a switch is possible. Plans currently vary as to whether and when a "successor" account owner may be appointed and whether and when the change can take effect.

What are the possible alternatives? Does the grandparent give the money to the child who then establishes an account for the grandchild, out of reach of Medicaid?

This simple solution is attractive, but carries its own risks, familiar to all planners counseling the elderly who wish to "shelter" their assets by making gifts to family members. The donor should have the following concerns in addition to worrying about his or her own vulnerability to the demands of nursing home expenses:

(1) Concerns about the creditors of the account-owner. The beneficiary's parent is not necessarily more creditor-proof than the grandparent. Aside from long-term care expenses, it is more often the baby-boomer child with a third spouse and overloaded Visa card, not the 70-year-old Depression-survivor, who has creditor problems.

(2) Concern about the account owner's bona fides. The account "owner" can withdraw the funds. Perhaps the courts will develop a theory of fiduciary obligation owed by account owner to beneficiary, but none yet exists. Moreover, fiduciary duty does not necessarily mean fiduciary adherence to duty.

(3) Concerns about successor owners. Even if the chosen account owner is True Blue, there is still the problem of a successor. Some plans permit the account owner to name his or her successor, or require that the account owner's spouse or child's living parent become the successor owner, with all the powers of the original account owner. These plan rules may or may not make sense. Although grandmother trusts Devoted Son to serve as account owner for grandchild's education funds, who knows what E<F

(4) Custodial Account Concerns--Future Ownership by Beneficiary. Many plans now expressly authorize accounts to be established by a custodian under the applicable Uniform Gifts to/Transfers to Minors Act. If so, beneficial ownership of the funds would be held by the future student beneficiary in the event of the owner's death. However, these would usually require that the funds be turned over to the student-beneficiary's control at age 18 in some states, 21 in others. A donor probably should not use a 529 plan custodial account unless (s)he is confident that the funds will be needed for a particular beneficiary's own expenses and that the funds will be consumed before the beneficiary is 21 years of age. On the other hand, custodians of existing custodial accounts intended for college expenses may wish to jump quickly to 529 investments to enjoy the tax-exempt earnings, particularly if the custodial account income is currently enough to invoke the "kiddie tax," or tax at the parents' marginal rate, which applies when earnings of a child under 14 reach $1,400 or more annually.

The Trust Solution

The concerns raised when an individual other than the donor acts as "owner" of a 529 account may be resolved by the use of a trust. The trust would be signed by the funding grandparent as grantor, but not permit any revocation or reversion to the grandparent. The trust document would provide for a succession of decision-makers. The trust would "own" the account, which would then be shielded from the grandparent's, child's, and beneficiary's creditors, and immune from demands that the funds be spent on the long-term care expenses of the donor.

The trust itself need not qualify for annual exclusion treatment through Crummey powers or 2503(b) provisions. Instead, the trust can open the 529 account but subsequent contributions could be made directly to the account by the trust grantor or other third parties. All should enjoy the gift tax exclusion that applies to all contributions to 529 plans. This assumes, of course, that the plan permits third-party contributions. Most do, although typically direct-deposit contribution is not available.

This solution is not yet available everywhere. Few plans (including Maine and Connecticut) permit trusts to open accounts, although the trend is changing. Some may require that the trust instrument specifically authorize "investment" in 529 plans. It may be necessary to transfer assets of an existing trust to a new trust that includes such provisions prior to opening a 529 account in the trust name.

Needless to say, the grandparent's contributions to a 529 account, even one "owned" by a trust, could still affect the donor-grandparent's eligibility for Medicaid if application were made within five years. It is safe to assume that Medicaid agencies tracking transfers will consider the gift to the account to be a gift "to a trust" because of the tax identification number.

Use of a trust as "owner" of a 529 plan account may also come in handy when a beneficiary has special needs:

(1) For a substantial special needs trusts (for example, one funded by a large personal injury settlement), a 529 plan investment will permit tax-deferred investment without incurring the 10% penalty on non-educational distributions made to meet special needs. Section 529(c)(6) refers to Section 530(d)(4)(ii)(B), which provides that the 10% penalty does not apply to any distribution "attributable to the designated beneficiary's being disabled."

(2) A 529 plan investment may also prove useful for third-party special needs trusts. These trusts are complex trusts which face steep income-tax brackets. Moreover, when distributions are made to the beneficiary, they carry out taxable income, which may require a further distribution to pay the tax, potentially creating an annual circle of tax on tax on tax. Particularly if funds will "build" for a time before they are needed, investing in a 529 plan may prevent or defer this painful and often overlooked problem.

(3) As noted above, the special gift tax exemption for contributions to 529 plan accounts under Section 529(c)(2)(A) solves the perennial problem of making annual exclusion gifts to a special needs trust without opening the trust to attack from those granting benefits to the child. Assuming the plan permits third-party contributions, the grandparents of a special needs child can make annual exclusion gifts to the child's 529 account just as they make gifts to the child's sibling's account.

There may be some complications when a trust is the owner of a 529 account used not only for income tax deferral, but for the intended purpose of funding higher education expenses. Care should be taken when completing financial aid applications to ensure that fund assets aren't counted as the beneficiary's when determining financial need. One option may be to use a sprinkle trust format, which dovetails nicely with the account owner's retained power to switch account beneficiaries. Another consideration is avoidance of taxable income to the beneficiary when the account makes distributions, since all distributions by a trust "carry out" trust income for tax purposes. Ideally, therefore, a trust that is the owner of a 529 account should not own other investment assets. Care should also be taken to avoid taxable income to the beneficiary.

Student Loans: (Department of Education 2002) There are currently 16 million people owing $250 billion in student loans. The average graduate from college this year will have $17,000 in loans from a public school and $19,000 from a private school, and far more for elite universities.

Federally-guaranteed student loan rates are set each year based on the rate on 3-month Treasury bills in late May for the year starting July 1. Right now, the rate is an amazing 4.06%.

If you took out a student loan after1998, your rate should automatically fall to about 4%, but if was before 1998, you will have to initiate the refinance. You have until July 1, 2003 to refinance old student loans to the new lower rate.

To refinance, your bank takes an average of the rates on all your federal education loans, rounded up to the nearest 1/8 of a percentage point.

At Sallie Mae, they will cut the rate by one percentage point if you make 48 consecutive on-time payments. Other lenders will cut rates by a quarter point if you allow automatic debiting on your bank account to repay the loan.

College loans: (2002) Interest rates on federally guaranteed student loans dropped about two percentage points July 1, from nearly 6% to just over 4% (USA Today, 6/4/2002). The interest rate you pay will vary ever-so slightly, depending on when you borrowed the money and a bunch of other factors .

If you've got outstanding Stafford loans or PLUS loans (for parents who help their kids pay for college), consider consolidating those loans and locking in this lower interest rate. You could save some real money over the life of the loan. You can only consolidate federal student loans once, so you're out of luck if you have already done so. Also, if you consolidate now, you're stuck with the rate you get this year for the life of your loan.

You have until July 1, 2003, to consolidate your loans, which provides just enough time for you to put it off awhile.

529 Plans: (2002) Nearly $200 billion is expected to flood in by 2007, up from a projected $25 billion in 2002.

USA TODAY's analysis found that many plans sold by brokers and financial advisers underperformed 529 plans that investors could purchase on their own at little or no up-front cost.

USA TODAY ranked the plans using 12 criteria, including investment performance, costs, fund choices, restrictions and flexibility. The analysis found that in many cases, the smallest plans offered the best performance for the lowest cost. Tennessee's direct-sold plan, for example, was one of the top performers, even though it has less than $5 million in assets. Conversely, some of the largest plans, such as those offered by Maine and Rhode Island, earned below-average grades.

Among other findings:

Sales fees and expenses can eliminate gains. Commissions on broker-sold plans can be expensive. About two-thirds of all money stashed in 529s is being routed by financial advisers, who earn commissions on the sale. Investors who bought Arizona's InvestEd Plan paid brokers sales charges of 5.75%, more than the average fund in the plan earned the 12 months ended March 31. A family that invested $6,000 in the plan would earn $312 but pay $345 in sales charges.

On average, the sales charge on broker-sold plans is 3.5%, Geracioti says. On $6,000 — the average 529 plan investment — that reduces the amount invested by $210.

Worse, 529s purchased through financial advisers or brokers typically carry higher management fees than plans directly offered by states. For example, the Mercury Large-Cap Core fund, available under Arkansas' GIFT College Investing Plan — but only through advisers and brokerages if you're a non-resident- charges 1.38% in annual expenses. The Vanguard funds offered through Utah's direct-sold Educational Savings Plan charge less than 0.35% a year.

High-cost funds trouble William Urban, an independent investment adviser from Menlo Park, Calif. "There's very little question that cost has a huge impact on total returns," Urban says.

Moreover, some plans sold through brokerages and advisers charge higher expenses to investors who sell after holding the account only a few years.

Broker-sold plans can have lousy returns. Maine's NextGen College Investing Plan features broker-sold funds such as AIM Weingarten, which has fared worse than 86% of all large-company growth funds the past 10 years, according to Morningstar.

Ohio's plan offers Putnam New Opportunities, which has lagged 72% of similar funds the past five years.

Seligman High-Yield Bond, part of North Carolina's College Vision Fund, ranks in the bottom 10% of all high-yield funds over the past five years.

Many plans are poorly diversified. Many states with recently formed 529 plans sought funds with track records built during the go-go 1990s. But growth funds, which look for companies with red-hot earnings growth, got clobbered when the market began souring in early 2000. Delaware's College Investment plan, for example, features Fidelity's Blue Chip, Growth Company and OTC funds, which lost 16% to 25% in 2001 alone.

Sure didn't expect this- (2002) though I know the cost is excessive: Half of the 39 percent of parents who are not saving for their children's college education say they do not expect their children to ever attend college, a dramatic 15 percent increase over last year. Obviously, when asked their biggest fear about saving money for their children's college education, 29 percent of parents cited never being able to save enough money.

Of those who are not saving, 72 percent plan to try pay for their children's college education as they actually attend college, and 24 percent of parents not saving expected their children to pay their own way through college.

The major barrier for a majority of non-saving parents, 65 percent, is the fact they have no discretionary income.

75 percent of the parents surveyed said they did not know enough to make good investment decisions, but 62 percent of the parents prefer a savings plan they can self-manage. Further, the majority of parents this year expect far lower returns on their college savings, 19 percent compared to 24 percent in 2001, yet only 10 percent of parents saving for college in the past year reported returns of 10-24 percent.

the investment vehicles they choose remain extremely conservative, with bank savings accounts, one of the lowest-return savings vehicles, being used by 61 percent of parents. That number rose 7 percent over 2001 even as parents anticipated continued dramatic increases in college costs. The risk-aversion shows up throughout with only two in 10 reporting switching investment vehicles during the turbulent economic year and 73 percent saying they would probably never change their investment lineup. Awareness of government-backed 529 Plans for college investing has doubled among parents to 16 percent, but the vast majority of parents remain unfamiliar with the savings plan, according to the survey. And only 7 percent indicated knowledge of stable value funds, a conservative investment many financial experts have turned to in the turbulent past two years.

College: College costs 2002 for private schools is $17,123 and public schools at $3,754. That does not include room and board. For a new born, the estimated cost of college 18 years from now is $268,335 for a 4 year private school.

Colleges offer their own "preferred lenders," but better deals can be found. Here are some, and the total costs, on a $15,000 loan over a 10-year term. (WSJ and Vensura 2002)

SCHOOL       Lenders Provided on Web Site        Better Loan Deals

University of Massachusetts, Boston Nellie Mae, $17,868 Access Group, $17,097

Bank of America, $17,626 MEFA, $16,815

National Education, $17,371 MOHELA, $16,674

University of California, Los Angeles Bank One, $17,868 CHELA, $16,878

Chase, $17,868 ALL, $16,674

Nellie Mae, $17,868 MOHELA, $16,674

University of Notre Dame Nellie Mae, $17,868 Access Group, $17,097

Citibank, $17,450 borrowsmart-trust.com, $16,769

Wells Fargo, $17,388 MOHELA, $16,674

Syracuse University Chase, $17,868 Access Group, $17,097

HSBC, $17,626 borrowsmart-trust.com, $16,769

Citibank, $17,450 MOHELA, $16,674

Note: Among other factors, calculations are based on current interest rates of 3.46% while in-school; 4.06% after graduation

You wanted kids- you gotta pay for them: (USA Today, College Board 2002) tuition and fees at four-year public institutions now average $4,081, a rise of 5.8% over last year. Tuition and fees at four-year private colleges also rose an average of 5.8% to $18,273 for this year.

A 7.9% increase at public two-year schools caused tuition and fees to rise to $1,735, while students at private two-year institutions experienced a 7.5% increase to $9,890.

The College Board said that a record $90 billion in student financial aid — including loans — was handed out during the 2001-2002 school year, a boost of 11.5% over 2000-2001.

The report also said that 54% of student aid came from loans last year. A decade earlier, loans accounted for 47% of student aid.

Grants comprised 39% of the aid provided to students, a decline of 11% from 1991-1992.

College Loans (USA Today 2002) On July 1, the interest rate on federal student loans dropped to a record 4.06%. The rate decline was automatic for federal Stafford loans disbursed after July 1, 1998. The rate is adjusted annually, but borrowers who consolidate their loans can lock in a fixed rate of 4.13%.

College graduates are typically given a six-month window before they're required to start repaying their loans. During this period, interest continues to accumulate, but at a lower rate than the repayment rate. Recent graduates who lock in during their grace periods will be able to lock in rates as low as 3.5%.

The main drawback to consolidating during your grace period is that you must start making payments. But if you graduated in the spring, your reprieve is about to end, and you'll have to start making payments anyway, says Maureen McCarthy Mello, senior vice president of marketing for Academic Management Services, a loan provider.

College: (2003) Although incomes are rising by only 1% to 2% in most states, tuition at four-year public schools leapt by 24% in Massachusetts, 20% in Texas and 7% nationally since the 2001-2002 school year, the center says. New York had the smallest increase, only 2%. But proposed tuition increases of 35% or more at the State University of New York and the City University of New York would put New York in the lead. Meanwhile, total tuition aid is down 10% in Illinois, 13% in Connecticut and 20% in Arkansas.

You wanted kids- then you pay for them: Harvard says that an undergraduate will pay $37,928 for tuition, fees and room and board. in 2003- 2004

529 plans being taxed: (USA Today 2003) College 529 plans let families invest up to $250,000 in a portfolio of mutual funds. As long as the money is used for college, earnings are exempt from federal taxes.

But some states, due to their high deficits, are going to tax out of state investors. Illinois, New York, Tennessee  are just a few. More to come.

PREPAID TUITION PROGRAMS IN TROUBLE - Skyrocketing tuition costs and weak investment returns are causing problems for many prepaid college tuition programs. Most states are raising prices, while some are considering limiting enrollment.

College (2003): Tuition for public schools has risen about 9.6% annually and 5.8% for private four your institutions.

College:  (2003) The interest rate on Stafford loans is expected to fall from 4.06% to 3.42%, the lowest since the program began in 1965. These loans are open to all students, and the government will pay the interest for financially needy students while they are in school. The rate for another federal borrowing plan -- the Parent Loan for Undergraduate Students -- will likely fall from 4.86% to 4.22%.

And those who consolidate their loans can lock in a rate as low as 3.5%, down from 4.13%, according to Sallie Mae, the largest source of student loans.

every state raised tuition at four-year schools this year; 16 increased costs by more than 10%, according to the National Center for Public Policy and Higher Education.

The average yearly tuition and fees at a four-year school is $4,081, and room and board costs an additional $5,582, the College Board reports.

529 Plans- (Cerulli Associates 2003)  Despite 1.6 million new accounts and more than $10 billion in new assets under management in 529 college savings plans last year, providers have been disappointed with the performance of the individual plans.

While there are more than 70 savings plans now in operation, a mere seven providers closed 2002 with in excess of $1 billion in assets. But, assets in the plan are expected to grow 40% by 2008, compounded annually.

Competition for the assets in this space is growing, the report notes, but the top 10 providers control 82% of the assets. Cerulli said that 25 other providers divided up 18% of the assets.

Profitability of these plans has been a major concern of providers, as the average balance of $6,457 falls short of covering operational and account administrative costs in most cases. However, there is room for growth. At the close of 2002, awareness of the programs was minimal and a mere 4.3% of children under 18 in the U.S has an account.

529 Plans (2003) As of March 31, the plans had about $29 billion in assets  with about 3.5 million children listed as beneficiaries. For the past 12 months through March, the average 529 stock portfolio lost 25.8 percent .

College 529 plans: (2003) About $30 billion is now spread among more than three million accounts, and the flood of cash is rising exponentially. And they can be the best thing since slice bread. Unless you are clueless to the potential fees. there may be initial enrollment fees, annual maintenance fees, plan management fees and fees for the underlying investments. Those who invest in a 529 through brokers may also have to pay commissions, which now run as high as 5.75 percent in many states.

Financial Research Corporation in Boston, 68 percent of the cash Americans funneled into 529 plans in 2002 passed through commissioned brokers and financial planners, compared with only 20 percent in 2000.

Among those on the low end of the fee scale are the College Savings Iowa plan, which uses Vanguard funds and has an annual fee of 0.65 percent, and Nevada's Vanguard 529 Plan, which has an annual fee ranging from 0.65 percent to 0.85 percent. Neither charges a commission. At the other end is Wyoming's College Achievement Plan. Morningstar calculated that a resident investing directly in a portfolio in the Wyoming plan divided equally among stock and bond funds would pay annual expenses of 2.21 percent. If a parent used a broker, the annual charge would rise to 2.71 percent.

nearly 2,500 investing options exist within the nation's 529 savings plans.

529 college plans: (2003) These started in 1996 and has spawned about 70 programs with at least 340 options for investing in at least 300 mutual funds.

There is now about $10 billion invested and growing to $400 billion by  2010/

The average account balance is only $5,300.  The rich have a different minimum. Those worth at least $5 million have about a $100,000 balance.

529 plans: (Financial Research Corp 2003) Broker-sold plans are gaining assets fast. In 2000, roughly 20% of new 529 plan assets were purchased through a broker or financial adviser. Those numbers jumped in 2002, when 64% of plans were sold by brokers

College (USA Today 2003) Students attending four-year public colleges and universities in 49 of the 50 states will feel the pinch of tuition hikes ranging from 1.7% in Montana to 39% in Arizona. Only Mississippi kept tuition at 2002-03 levels.

Sallie Mae, the country's largest provider of guaranteed loans, granted $6.8 billion in student loans during the first half of 2003 — compared to $5.6 billion in loans issued during the same period in 2002.

Yet one more reason why I did not have children:

Institution 2003-04 tuition* Increase from 2002-03

University of Arizona $3,593 39.0%

University of California $5,437 30.0%

Oklahoma State University $3,748 23.9%

Texas Tech University $4,745 22.7%

Iowa State University $5,028 22.3%

* Based on in-state tuition and fees; Source: National Association of State Universities and Land-Grant Colleges

Prepaid tuition: (WSJ 2003)  The prepaid plan, run by the nonprofit Tuition Plan Consortium, will let parents pay for a portion of a private college's future tuition at a discounted rate. The percentage of tuition paid will remain fixed no matter how much the price of tuition rises.

So far, 221 private colleges in 38 states have signed up, including Princeton University, Amherst College, University of Chicago and University of Notre Dame. A list of participating schools should be posted at www.independent529plan.org when the plan launches.

Here is how it works: If you contribute $10,000 in hopes of sending your child to a school that now charges $20,000 a year, you would have locked in half a year's tuition. If you contribute an additional $10,000 the next year, but tuition at your target school rose to $25,000, you would buy an additional 40% of a year's tuition, for a total of 90% of a year's tuition. The maximum that can be invested in the plan is five years' tuition at the group's most expensive college, now $137,000.

The amount of future tuition you can lock in depends on which school your child attends, the number of years before your child starts and the discount rate the college offers. Schools are required to offer a minimum 0.5% annual discount, but the median discount is currently 1%, and discounts run as high as 4.5%, according to plan organizers. Someone who invests in the plan for 10 years at the median rate would get slightly less than a 10% tuition discount, because of the plan's complicated formula.

Schools can change the discount rate each year, but only for new deposits

If your child isn't admitted or picks a school that isn't in the plan, you get your original investment back, adjusted for fund performance, capped at plus or minus 2% a year. You can also roll over the money to another beneficiary or into either a regular 529 college-savings plan or a state prepaid plan without penalties.

The plan should appeal to conservative investors or families who favor private schools over public schools.

The plan might also make sense for private-college alumni who want to send their children to their alma maters. Colleges say they are supporting the plan to help make private-college tuition -- which rose an average of 5.8% last year, the College Board says -- more affordable.

The plan isn't without risks to the schools. If investment returns don't keep pace with tuition increases, the schools must make up the shortfall. That is why you must wait at least three years before you can redeem any investments. The plan will spend that time investing the money and building up reserves. Also, prepaid plans such as the Independent 529 could have a bigger impact than a 529 savings plan on getting financial aid. Withdrawals from prepaid plans are considered a student resource, which reduces aid eligibility dollar for dollar.

College credit card debt. (2003) 78% of college students have their own credit cards today, up from 11% in 1998, with an average of five cards per student and an average debt load of about $3,400.

Three quarters of students use their student loans to pay credit card bills instead of tuition and 3 out of five freshmen have maxed out their credit cards by the end of their first year.

Average College Costs for Undergraduates (2003)

Tuition and Fees

Sector                                                       2003-04                       2002-03           % Change

Two-Year Public                                       $1,905                         $1,674             13.8%

Four-Year Public                                      $4,694                         $4,115               14.1%

Four-Year Private                                       $19,710                      $18,596            6.0%

Room and Board

Sector                                          2003-04                  2002-03                 % Change

Two-Year Public NA NA NA

Four-Year Public                            $5,942                 $5,574                    6.6%

Four-Year Private                          $7,144                  $6,807                   5.0%

Total Charges

Sector                                 2003-04                      2002-03             % Change

Two-Year Public NA NA NA

Four-Year Public                $10,636                       $9,689               9.8%

Four-Year Private               $26,854                        $25,403             5.7%

Source: The College Board

Comparison of Coverdell account with Section 529 plan

College:   (2004) Growth in Tuition and Fees by Region

Just another reason I never had children : (2004) With median 2003-04 tuitions at day schools ranging from $12,234 for first graders to $16,000 for high school students (add at least $14,000 more for boarding school), according to data from the National Association of Independent Schools, you've got yourself a financial dilemma if you gross less than $200,000 a year.

[Image][Image]

Where Are Your Clients' Children Going to Go? (College Board)

The percentage of fulltime undergraduates at four-year schools, arranged by tuition/fees

You wanted kids so you have to pay: (WSJ 2004) When you save money for their college, your ability to get aid drops (simply because you have money that you can use for their education) .  A study by Harvard University Prof. Susan Dynarski shows exactly how much people stand to lose.

The study said a family making $100,000 can see a reduction in certain college financial aid by $1.94 for every after-tax dollar from a Uniform Transfer to Minors Act account, a custodial account for minors. The problem is less marked with state-sponsored Qualified Tuition Programs or Section 529 college-savings plans, but it still hurts. Such a family would see a 21 cent reduction for every after-tax dollar from these accounts.

For money in a non-tax-advantaged mutual fund, financial aid would be reduced by 76 cents for every after-tax dollar.

22% of families making $100,000 or more getting a grant, loan or other form of need-based aid in 2000, the study said. Average aid for these families was $4,975.

Such aid is more prevalent as tuition costs soar. Average private-college tuition and fees rose 6% to nearly $19,710 in the 2003-2004 school year, according to the College Board. Tuition costs for four-year public institutions rose 14% to $4,694.

With the Uniform Transfer to Minors Act accounts, the losses are drastic because the college financial-aid system considers such funds to be assets of the child, which penalizes families in the aid formula.

By contrast, state college-savings plans, known as 529 plans, are considered assets of the parent and not the child, and therefore aren't subject to such a sharp erosion.

Stafford loans: (2004) The interest on your Stafford Loans is variable (meaning that it changes when interest rates change) until you use the Federal Consolidation Loan Program. After you consolidate the interest rate on your new consolidation loan is fixed, it can never go up again.

This just keeps going up and up: The average tuition and fees at four-year colleges continues to increase, last year rising 4.4 percent at public institutions and 5.2 percent at private colleges.

College Grads: (MonsterTRAK 2004) Just 10% of this year's college graduating class has secured a job, and more than half (51%) are not optimistic about the prospects for a job offer when they graduate (only about a third are worried about off shoring affecting their job chances). Sixteen percent have opted to head on to graduate school, and 57% plan to move back in with their parents upon receipt of their diplomas. Half of last year's graduates are still living at home with their parents, according to the online recruiter.

529 Plans: Baby Boomer households were most likely to be aware of the so-called 529 college savings plans (54%), versus 42.8% of Matures with 529 plan familiarity and 40.5% of GenXers. Yet, it is Generation X that has the most children under 18 in their house (57 million), followed by Baby Boomers (36 million) and Matures (4 million), according to a new survey released by MFS. Across all three generational groups, the most important factor in selecting a 529 plan was the ability to control assets and to control related distribution options, selected by 42% of matures, 53% of Boomers, and 45% of GenXers.

529 plans: (2004) Some regulators, financial analysts and members of Congress are concerned that some brokers and investment companies are charging too much. Often, they say, fees are so high that they outweigh the plans' tax benefits. And even low-fee plans can be a bad deal if investors buy them through brokers who charge commissions as high as 5.75 percent.

Assets in the plans rose to $40 billion at the end of the first quarter, from about $9.2 billion at the end of 2001.

Plans with low operating expenses tend to be sold directly to investors, but many plans are available only through brokers. The share of plans sold by brokers jumped to 65.2 percent at the end of 2003 from 20.4 percent at the end of 2000, with 75 percent of new business driven by brokers, Mr. Dow said. Commissions can be up to 5.75 percent.

As for 2004 comments about tuition, A USA TODAY 50-state survey of 67 public flagship universities shows that although some schools, including Texas, North Dakota, Illinois, California and Kansas, will see double-digit increases, others are increasing tuition and fees by relatively small percentages.

The average is 9%, which translates to $491. Last year, the average percentage increase was 14%. The most expensive in-state tuition this year of the 67 schools was Penn State at $10,856, a jump of 12% since last year but 30% since 2002-03. Rutgers was next: Tuition increased 8% this year — 40% since 2002-03. The University of Vermont, at $10,226, had a 6% increase this year, 14% since 2002-03. In a few states, tuitions have increased 50% or more since 2002-03.

529 Plans: (2004) These are used by about 4.7 million people with assets of about $43 billion.

College insurance: The cost of college is an increasing burden for many families. In the 2003-04 school year, the average cost of attending a private college rose 6% to $19,710, while for a four-year public college it rose 14% to $4,694. Over the decade ended in 2003-04, average tuition and fees rose 47% at the public colleges and 42% at private colleges in constant dollars.

The insurance plans typically cost around $200 for the school year and provide a complete refund of tuition for the term if a student has to leave for "medical" reasons. They do so by making up the difference between the institution's refund and the total tuition. (Universities' refund formulas differ significantly: At Duke University, if a withdrawal occurs in the fifth week, the school refunds 60% of the money, compared with 20% at Brown.) The insurance company's reimbursement is less generous if those reasons are related to mental health, however: In that case, the refund is typically 60% of what was paid. The plans typically don't cover other major reasons for college students' dropping out, such as academic difficulties or family problems.

At the private grade-school level, the plans typically cost about 2% of the year's tuition, anywhere from about $100 to $250 and possibly more at a boarding school. But unlike the college plans, these are more generous, refunding tuition for any reason, from a family move to a dismissal, though for nonmedical or mental-health reasons, the reimbursement is less than 100%, more typically in the 60%-to-75% range.

School Solutions, an offshoot of a British insurance company, began offering a version of a tuition-insurance plan that has been popular for years in the U.K. Its Tuition Protection Plan differs from the other plans in that it can pay as much as $20,000 a year in tuition in the event that a parent dies or becomes terminally ill, through grade 12. The annual cost of the plan varies depending on how expensive the school is. For an extra $75 a year, a parent can add two years of college-tuition coverage.

Markel Insurance is testing its own tuition-insurance plan at 25 private primary and secondary schools. Its product costs 1%-2% of tuition, or roughly $250 to $500, and can cover 100% of tuition owed if the student withdraws for medical reasons -- and typically 75% of it for other causes, such as a family move or a disciplinary dismissal.

Best colleges?: (2004) "A Revealed Preference Ranking of U.S. Colleges and Universities" CHRISTOPHER AVERY, MARK GLICKMAN, CAROLINE MINTER HOXBY, ANDREW METRICK

We show how to construct a ranking of U.S. undergraduate programs based on students' revealed preferences. We construct examples of national and regional rankings, using hand-collected data on 3,240 high-achieving students. Our statistical model extends models used for ranking players in tournaments, such as chess or tennis. When a student makes his matriculation decision among colleges that have admitted him, he chooses which college "wins" in head-to-head competition. The model exploits the information contained in thousands of these wins and losses. Our method produces a ranking that would be difficult for a college to manipulate. In contrast, it is easy to manipulate the matriculation rate and the admission rate, which are the common measures of preference that receive substantial weight in highly publicized college rating systems. If our ranking were used in place of these measures, the pressure on colleges to practice strategic admissions would be relieved.

College: (2004) the National Association for College Admission Counseling, an organization of college and high-school counselors, voted to allow its nearly 5,000-member colleges to broadly adopt "single-choice early action" policies. Under these policies -- which fall somewhere between the two traditional ones -- students apply early to only one school. However, they won't be required to attend if they are accepted.

schools typically provided only two options for early admission: A completely open policy, allowing students to apply to as many schools as they like, or a much more limited one, where a student applies early to one school and is required to attend if accepted.

You had kids, you have to pay: (College Board) prices at the nation's colleges and universities continued to increase this year, to an average of $5,132 for in-state students at four-year public schools and $20,082 for four-year private schools.

That's an increase of $487, or 10.5%, for tuition and fees at public colleges and $1,132, or 6%, at private colleges. Tuition at two-year public colleges increased an average of $167, or 8.7% this year, to $2,076.

The 2004-'05 costs remain at historic highs but represent smaller increases than last year's 13% for public colleges and 6% for privates.

The report also says students received more financial aid last year, a total of $122 billion, up 11% from 2002-03 after adjusting for inflation. But students are increasingly turning to private loans to pay for college, and of the grant aid that is available, a larger proportion of federal loans and tax benefits is going to families who are not considered the neediest.

Tuition and fees at some schools are up 50% or more since 2002-03, USA TODAY found. University administrators blamed the increases on state budget cuts, higher enrollment, rising health insurance costs, construction and renovations.

The new study also confirms an earlier investigative report by USA TODAY that found the amount the average student actually paid for a public four-year institution in 2003-04, after grant aid and education tax benefits, was about $1,300. Adjusted for inflation, this is less than students paid a decade earlier.

• 73% of public four-year schools charge less than $6,000 for tuition and fees; nearly 47% of privates charge $15,000 to $23,999.

• Prices for room and board also increased this year, an average of 7.8% at four-year public colleges (to a total of $11,354 including tuition and fees) and 5.6% at private schools, to a total of $27,516.

Pell Grant program for low-income college students (2004) : the maximum grant will be frozen at $4,050. The number of students receiving Pell Grants has increased 37% in the last decade to more than 5 million.

College Costs: (2005) Education costs are right up there with medical costs in rates of increases that have far outstripped inflation.

Most expensive private schools

1. Sarah Lawrence College -- Bronxville, N.Y. $32,416

2. Kenyon College -- Gambier, Ohio $32,170

3. Trinity College -- Hartford, Conn. $31,940

4. George Washington University -- Washington, D.C. $31,710

5. Hamilton College -- Clinton, N.Y. $31,700

6. Bowdoin College -- Brunswick, Maine $31,656

7. Wesleyan University -- Middletown, Conn. $31,650

8. Columbia University -- New York $31,472

9. Colgate University -- Hamilton, N.Y. $31,440

10. Pitzer College - Claremont, Calif. $31,438

Most expensive public schools

1. Penn State University -- University Park, Pa. $10,856

2. University of Pittsburgh -- Pittsburgh, Pa. $10,830

3. University of Vermont -- Burlington, Vt. $10,226

4. University of New Hampshire -- Durham, N.H. $9,226

5. New Jersey Institute of Technology -- Newark, N.J. $9,180

6. Temple University -- Philadelphia, Pa. $9,102

7. University of Massachusetts -- Amherst, Mass. $9,008

8. Rutgers University -- New Brunswick, N.J. $8,564

9. University of Cincinnati -- Cincinnati, Ohio $8,379

10. Rutgers University -- Newark, N.J. $8,209

Least expensive private schools

1. National Hispanic University -- San Jose, Calif. $4,610

2. Arkansas Baptist College -- Little Rock, Ark. $5,074

3. Talladega College -- Talladega, Ala. $7,128

4. Lane College -- Jackson, Tenn. $7,176

5. Tougaloo College -- Tougaloo, Miss. $8,375

6. Judson College -- Elgin, Ill. $9,420

7. Paine College -- Augusta, Ga. $9,624

8. St. Augustine College -- Raleigh, N.C. $10,388

9. Barber-Scotia College -- Concord, N.C. $10,686

10. Wesleyan College -- Macon, Ga. $10,900

Least expensive public schools

1. University of Nevada -- Reno, Nev. $2,682

2. Florida State University -- Tallahassee, Fla. $2,890

3. San Diego State University -- San Diego, Calif. $2,936

4. University of Florida -- Gainesville, Fla. $2,955

5. Florida Atlantic University -- Boca Raton, Fla. $3,092

6. Texas A&M University -- Kingsville, Texas $3,109

7. Florida International University -- Miami, Fla. $3,156

8. University of South Florida -- Tampa, Fla. $3,167

9. University of Central Florida -- Orlando, Fla. $3,180

10. University of Nevada -- Las Vegas, Nev. $3,210

College plans and loans: (2006) Investments in 529 savings plans and Coverdell ESAs (previously called education IRAs) are treated as parental assets and reduce a child's eligibility for federal student aid by a maximum 5.64% of their value at the time of application. That's a lot better than assets in Uniform Transfers to Minors Act, which are assessed at 35% in the aid formula.

Was the sex worth it?: (WSJ) Private-school tuition is continuing to climb sharply, putting a burden on even the affluent families that send their kids to such schools.

After three years of marked increases, elite K-12 institutions around the country say their costs continue to rise and they have no choice but to raise rates. Some New York City schools are now topping $30,000 a year with certain fees. Even kindergarten at Trinity School will cost over $27,000. But in an acknowledgment of the rising toll on parents, some schools are offering aid to families making as much as $250,000 a year.

The changes come on top of increases of 1.6% to 7.4% a year over the past three years.

College aid: (WSJ 2006) Direct aid. This is the most valuable type of financial aid, because the money doesn't have to be paid back. Direct aid typically comes in two forms: scholarships and need-based grants.

Most scholarships are guaranteed, sometimes for all four years, as long as you meet certain conditions, such as maintaining a high grade point average.

A grant, on the other hand, is almost always based on financial need. If your family's finances improve after your freshman year, the grant could shrink. "Long term, a scholarship is a better deal."

Distinguishing between scholarships and grants is particularly important if you have an older sibling now in college. Once that sibling graduates, your grant might diminish or disappear.

Loans and work-study.

College financial-aid offices call this type of aid "self-help." That's a polite way of saying that you're either going to have to work for the money or pay it back.

Under the federal work-study program, you earn money toward college by working a part-time job. Wages are usually low. But your work-study earnings won't be counted as income for purposes of future financial aid. Income from other jobs will.

Limit work-study to 10-15 hours a week. Students who work more than that risk falling behind academically. You're not required to work at all, but if you decline work-study, you'll need to find another source of funds to make up the difference.

The rest of your self-help package consists of loans. Types of loans:

• Federal Perkins. This loan is based on economic need and has the most favorable terms. Perkins loans have a fixed rate of 5%, and the government pays the interest while you're in school. You may also qualify for loan forgiveness if you pursue certain careers after graduation, such as teaching or social work. The maximum an undergraduate can receive is $4,000 a year.

• Subsidized Stafford. This loan is also based on need. The government pays the interest while you're in school. Starting July 1, new federal Stafford loans will carry a 6.8% fixed rate.

• Unsubsidized Stafford. This loan isn't based on economic need and is available to all students. The government doesn't pay the interest while you're in school. Instead, the interest accrues until you graduate, when you're required to start making payments on the loan. Terms are usually better than those for private loans.

• PLUS. Parents of college students can use these federally backed loans to help make up the difference between financial aid and the cost of college. Starting July 1, new PLUS loans carry a fixed rate of 8.5%.

Like unsubsidized Stafford loans, PLUS loans aren't based on financial need. So be wary of any offer that includes a PLUS loan as part of the package. "Anybody can get a PLUS loan. "They're not giving you anything. It's a bait-and-switch."

College Endowments: (WSJ) Colleges and universities earned average investment returns of 10.7% on their endowments during fiscal 2006, narrowly beating the Standard & Poor's 500-stock index, according to national survey results.

As usual, the largest endowments performed the best. Schools with endowments of $1 billion or more earned 15.2% during the year ended June 30, according to preliminary figures on 765 institutions collected by the National Association of College and University Business Officers and financial-services organization TIAA-CREF. Colleges with less than $25 million earned 7.8%.

The biggest endowments typically have access to lower average fees and to more sophisticated money managers and investments. Endowments of $1 billion or more, for instance, had less than half of their money in stocks last year. Nearly one-quarter of their assets were in hedge funds, 5.9% in private equity and 3.5% in venture capital. By contrast, colleges with endowments of under $25 million had 58.9% in stocks, 2.6% in hedge funds and less than 1% combined in private equity and venture capital.

Colleges and universities had earned 9.3% on average in fiscal 2005. Harvard University, the world's wealthiest in terms of total assets, earned 16.7% last year and increased its endowment to $29.2 billion. Massachusetts Institute of Technology, which had the sixth-largest university endowment last year, recently reported its endowment earned 23% and stands at $8.4 billion.

College Costs:

In the past five years, the average cost of in-state tuition and fees at public colleges has jumped 35% — after adjustment for inflation. In the past 25 years, the average cost of tuition and fees has risen faster than personal income, consumer prices and even health insurance.

For academic year 2006-07, the average cost of tuition, room and board at a public university was $12,796; for a private school, the total averaged $30,367.

During the same period, the amount of federal direct aid — money that doesn't have to be repaid — has declined, forcing more students to borrow. Nearly two-thirds of college graduates leave school with debt, up from less than half in 1993. And among those with loans, the average debt has jumped from $9,250 in 1993 to $19,200, a 58% increase after adjustment for inflation.

RISING TUITION

Tuition and fees for public, four-year colleges, not including room and board:

                                   2006-2007 Change from 2005-2006

Alabama                        $4,915 5%

Alaska                            $4,195 10%

Arizona                           $4,676 6%

Arkansas                       $5,298 6%

California                      $4,560 1%

Colorado                      $4,646 5%

Connecticut                  $7,140 6%

Delaware                    $7,410 6%

District of Columbia    $3,210 27%

Florida                       $3,336 4%

Georgia                       $3,913 6%

Hawaii                         $4,257 22%

Idaho                           $4,159 6%

Illinois                           $8,133 12%

Indiana                         $6,555 6%

Iowa                             $5,900 5%

Kansas                          $5,149 11%

Kentucky                       $5,758 12%

Louisiana                        $3,796 4%

Maine                              $6,583 8%

Maryland                       $7,241 1%

Massachusetts                $7,585 4%

Michigan                        $7,661 7%

Minnesota                      $7,495 8%

Mississippi                     $4,455 6%

Missouri                         $6,531 5%

Montana                        $5,255 8%

Nebraska                       $5,224 6%

 Nevada                         $3,651 9%

New Hampshire            $9,114 6%

New Jersey                  $9,298 9%

New Mexico                $3,985 7%

New York                   $5,046 1%

North Carolina             $4,063 10%

North Dakota              $5,509 9%

Ohio                           $9,357 6%

Oklahoma                  $4,246 11%

Oregon                      $5,576 5%

Pennsylvania             $9,041 5%

Puerto Rico              $1,396 0%

Rhode Island            $6,756 6%

South Carolina         $7,916 7%

South Dakota          $4,940 7%

Tennessee               $4,974 4%

Texas                     $5,940 8%

Utah                       $3,891 8%

Vermont                 $9,800 5%

Virginia                   $6,558 9%

Washington             $5,617 7%

West Virginia          $4,152 7%

Wisconsin               $6,044 7%

Wyoming               $3,515 3%

National avg.         $5,836 6%

Source: College Board

At state colleges and universities, which enroll about 75% of all college students, tuition covers only about a third of the cost of educating an in-state student, according to the College Board. The rest of the cost is covered by state subsidies.

But state funding hasn't kept pace with inflation or rising enrollment. State funding is at its lowest in three decades