Long gone are the days of not worrying about how to pay for your child's college expenses, and long gone are the days that families can pay for college with out-of-pocket money.

The average annual, national costs of tuition, fees, and room and board in 2006 at a four-year university is $20,000 per year. The average inflation rate for a college education is 5.5%, meaning that in 10 years, that same education will cost you almost $32,000 per year. There are few families that can afford another $20,000 per year of out-of-pocket expenses, and that assumes that you only have one child in college. Families are being stretched further than they have ever been when it comes to the family budget. Between rising property taxes, increased health care costs, saving for retirement and simply filling the gas tank, people are finding less and less money at the end of every month.

There are several ways that you can help cover the cost of college. We are going to address some of those ways and discuss how and why they should be used.

• Scholarships - Scholarships are great because they are given without any financial consideration. They are awarded to the student for what they have accomplished and are awarded by the school for what that child can bring and add to that school. One drawback of scholarships is you have no idea if your child will qualify for a scholarship until it is time to apply for college. Therefore, they are not an element that can be planned too far in advance.
  
  
• Financial Aid and Loans - Financial Aid is one of the most-common ways to cover a portion of a college expense. By this, we are referring to need-based aid. There will be an estimated $3 billion of Financial Aid available in 2006, and well over 50% of all college students will receive some need-based aid. Need-based aid uses a rather simple formula in determining aid amount. They look at the cost of the school and the family's ability to pay. The form that needs to be completed is the FAFSA form (Free Application for Federal Student Aid). It can easily be obtained on several Websites including the College Board Website (www.collegeboard.com). Need-based aid does not need to be paid back. Loans are another way to pay for a child's college. Any individual can apply for a loan to pay for college, but there are special low-cost loans available for college students. Low-cost loans are typically based on many of the same formulas as need-based aid but are not limited to those that simply are need-based. Low-cost loans have a lower interest rate associated with them than traditional loans. As with all loans, these will have an interest rate associates, and you are going to pay back more than what was borrowed.
  
  
• Pay Cash As You Go - as discussed above. This is where parents, grandparents and/or anyone else pays cash out of pocket to cover education expenses. Major drawbacks are lack of that large amount of cash flow for several years. Using that cash means you will not be able to more productively use that cash for a period of time. You know the saying: Cash is king, and parting with that much cash could be counterproductive.
  
  
• Pre-Fund - Pre-funding involves saving for a child's college expense year by year in the years leading up to college. There are several vehicles that one can use to accomplish this goal. The major advantage to pre-funding is you will have assets saved and will be able to cover a portion of the college expense. You can then use some of the other less-attractive vehicles to fund the difference.

College is and will remain to be expensive. But, through proper planning, there is a lot one can do to help minimize the impact of these expected costs. The answer is usually a combination of several of the alternatives mentioned above. Start today. Proper planning can help determine your best path to funding a child's future college expense.