As a planner who specializes in comprehensive college planning, every week I meet with parents who cringe when forced to think about how much it will cost to provide their children with a four-year college education. I can relate all too well; my son began attending a private college last fall.

The latest figures, published by the College Board for the 2008 to 2009 school year, show that the average total cost of attending a four-year public university is $18,326 per year and a four-year private university, $37,390. According to the Bureau of Labor Statistics, the amount that families pay after adjustments for financial aid has skyrocketed 439% since 1982, compared with a 108% increase of the Consumer Price Index over that same period.

This dramatic increase has caught many parents off-guard. Now, they're worrying about how they're going to manage paying college bills without materially affecting the rest of their family finances.

Underfunded

Various studies have pointed out that most parents are extremely under-funded to meet college expenses. To make matters worse, the stock market plunge in recent months has caused parents to experience severe setbacks to reaching their college savings goals. Many parents have witnessed their college savings accounts being slashed by as much as 40%, and now believe that their disciplined efforts are proving futile. At the same time, the downturn has savaged university endowments, leaving them less able to extend financial aid.

The collapse of housing prices and turmoil in the credit markets have broadsided families applying for student loans. The home equity they were hoping to borrow against may have evaporated. Even if they still have substantial equity in their homes, they may have trouble borrowing.

And for most families, borrowing for college is a necessity. At the same time, college graduates and students with private loans are facing higher interest rates.

How can parents and students rise above the challenges created by the current market? First, discuss with clients the various strategies they can use to reduce the cost of college. Let's explore a handful of them:

• For parents who still have a child in high school, a "college match" can save them a full year's college expenses or more. A college match involves precisely matching a student's profile with that of incoming freshmen considered highly desirable by a given institution.

  This profile is built on a combination of academic credentials, demonstrated talents and extracurricular activities. A student who is a great match for a particular institution may be offered financial enticements to attend.

• High school students can include in their curricula programs such as Advanced Placement and College Level Examination Program (CLEP) to receive college credit. With these credits, students have the opportunity to graduate early, saving mom and dad thousands. But many colleges have cut back on the actual credits they'll allow—if and—so you'll have to check with the institutions where the student plans to apply.

• Applicants should research and apply for private scholarships offered by clubs, foundations, service groups, corporations and individuals. This is free money that can typically be used at the student's college of choice. Some of these programs are need based, but many are based on merit—that is, they aren't contingent upon family finances.

There are awards based on an applicant's ethnicity, fields of study, hobbies and community service. If students take the time to learn how to find less-competitive or lesser-known scholarships, plus sharpen their skills at filling out scholarship applications, they can significantly improve their chances of winning these types of awards and reducing their college expenses. A helpful reource for researching such scholarships and applying for them is www.fastweb.com.

• Students who wish to attend private schools could attend lower-cost state colleges first and then transfer, saving up to 50% of four-year tuition costs. After all, no one ever asks, "What college did you attend your first two years?" Before embarking on this strategy, however, parents and students should ensure that the second school is disposed to accept credits from the first. There are no guarantees, and in many cases, the credits won't transfer.

• Families can also take advantage of tuition repayment plans. Most colleges offer these monthly installment plans, which can help families avoid having to take out education loans. Families can manage their income and cash flow by spreading tuition payments over a nine- or 10-month period.

The Loan Squeeze

The current economic environment is putting considerable pressure on families. But if parents and their financial advisors take a proactive approach to college planning, parents and students can avoid reliance on credit markets.

With expenses reduced as much as possible, families can resort to financing the remaining costs. As their advisor, you can help them navigate. Now more than ever, parents and students need to carefully develop a college funding plan. You can take a first step toward helping your clients by informing them of the changing dynamics of college funding. They should understand that the credit crisis has reduced the number of lenders participating in both the federal and private loan programs.

You can also explain to parents that federal student loans don't come even close to covering a significant percentage of total yearly college costs. These loans have ceilings. Some go up to $5,000 per year and others, up to $3,500. Students assume they will be able to get private financing to cover the rest of their costs, but this has become increasingly difficult.

Using this information and perspective as a backdrop, you can direct clients in how to secure financing at a reasonable price. Here are some points to include:

• Recommend that your clients borrow federal funds first.

• Make sure clients file a Free Application for Federal Student Aid (FAFSA) for each year their child will be in college. Families can't get access to federal loans without filing a FAFSA. These are filed online at www.fafsa.ed.gov. Planners can counsel their clients on these filings but should have the parents fill them out themselves, as schools don't like to see that a professional is involved.

• If your clients' student is attending a college that is aligned with the Federal Family Education Loan program, they have an opportunity to shop around for a lender to find the best loan terms. Different lenders offer various origination fees and/or interest-rate discounts.

• If clients must resort to taking out a private (non-federal) loan, make sure they thoroughly shop around for a lender. Rates and terms vary widely, and clients must read the fine print on loan documents. Private loans do not carry the same consumer protections as federal loans.

• Discuss the reality that "college planning is retirement planning." How your clients pay for college will likely have a significant effect on how and when they can retire.