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Never too soon to prep for college

| Saturday, Feb. 16, 2013, 9:00 p.m.

Look at your cute baby, and imagine the little tyke wearing a high school cap and gown about 17 years from now.

Picturing the child holding a diploma, when he or she can't even hold a rattle yet, is probably next to impossible. But that day will come. And if you're like most parents, as you watch Junior walk across the stage to pick up a diploma, you will be vacillating between feelings of pride and fear. At that point, your child will be headed to college, and the price tag will be so shocking you'll be tossing and turning at night.

If college prices continue to climb as they have the past few years, by the time today's newborns go to college, the sticker price will be about $37,700 for one year of tuition, room and board at a state university and $98,200 at a private college, said Kalman Chany, a college financial aid consultant and author of “Paying for College Without Going Broke.” For a four-year education, it will be about $161,500 at a university in your state or $426,400 at a private college, he estimates. To put that into perspective, many public colleges now run about $20,000 a year, and some private colleges are more than $55,000.

So maybe at this point you figure you will stick a bat or ball in the little tyke's hands the moment he or she can hold it, in hopes he's on the road toward winning an athletic scholarship. But let's face it: That's a remote possibility. Should you despair?

Remember, you don't need the entire sum saved for college the day Junior moves into a dormitory room. And during the next 17 years, your salary probably will rise along with college costs, so the numbers won't look as shocking as they do today.

In addition, low- and middle-income families don't have to pay the full sticker price if they are smart about college choices.

But if you want to make paying for college as painless as possible, you are going to have to start planning now. For the next 17 years, you will have to keep your eye on the calendar. Before children are old enough to get braces, some savvy parents start helping them build the type of resumes that will win scholarships.

But don't count on scholarships to do all the heavy lifting.

No matter how polished your child turns out to be in high school, the chances are you will have to come up with a good sum of money. So start now by saving as much as you can. Anything is better than nothing.

For college savings, you can make investing easy and the most profitable if you keep Uncle Sam away from taxing your savings. Plop either the $2,000 limit a year into a Coverdell college savings account, or if you can manage to save more, skip the Coverdell and use a 529 college savings plan offered by a state government. Anything you save in these accounts will be tax-free for you and your child if it goes to pay for college.

Elementary school

Maybe you've been saving diligently since you helped the little tyke blow out the candle on that first birthday cake. If you were making life easy on yourself, you evaluated 529 plans and chose one with low fees and solid performance, and you've been letting the investment experts at the plan invest your money in the manner that typically is appropriate for your child's age.

Are you satisfied with the 529 plan you chose, and the investments you've chosen within the plan? You are allowed to make changes once a year — selecting a plan in another state if you want, or different investments in the plan. Remember, you don't have to stick with the plan in your state, although many states give you an extra tax break if you do. And you can save money if you go to a state 529 plan directly rather than using a financial adviser. According to Morningstar, the average cost if you do this on your own is about 0.60 percent, but with an adviser it's 1.5 percent.

Meanwhile, now is the time to start looking for college scholarships. You might think that's crazy, but a few are available for children as young as 6.

High school

Parents often don't start thinking about college until their children are seniors in high school, and college acceptances start arriving with horrific costs in them. That's tragic.

By senior year in high school, they have missed the greatest opportunities for winning scholarships and adjusting household finances so families are in the best position to maximize the financial aid colleges will give them. It's critical to get ready to seek scholarships before your child's sophomore year in high school because many deadlines arrive during the fall of that year.

Your search for scholarships will reveal that there's something for everyone who's willing to work at it — from tall children to left-handed people. Find the most unusual scholarships at Unusual Aid and the most prestigious and high-paying like Intel's $100,000 at Prestigious Aid.

Along with your scholarship search, start having your child record all activities and honors. Scholarship applications and college applications require a list of activities and references from people who saw your child excel.

Check the 529 college savings plan to make sure investments are becoming more conservative. The last thing you want is a big loss from stocks when your child is getting close to college. According to a 2011 study by Morningstar, the average 529 plan kept only 33 percent of assets invested in stocks for a 14-year-old, and only 11 percent for an 18-year-old.

Before December of your child's junior year, sell investments that will pay for college. Also, go over every account in your name and your child's name to make sure the money is in the right place and won't sabotage your chances of getting grants.

Why? Because each year you want aid from a college, you will fill out what's called a FAFSA form, a Free Application for Federal Student Aid, and at private colleges maybe a PROFILE form, too. Embedded in those forms is a quirky formula that says whether you will get aid. To make the determination, colleges will require you to submit the forms and your tax return. You want your accounts and your tax return to be in the best shape for aid, starting with the tax year that begins Jan. 1 of your child's junior year.

In your child's senior year, you and Junior should be talking openly about money so that if a favorite school won't sweeten the deal enough, your child realizes the impact of having to borrow more.

Finally, before panicking over a college's price tag, realize that most schools will put you on a payment plan so you can pay monthly the same way you do a mortgage. .

Gail MarksJarvis writes for the Chicago Tribune.

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