Herb and Marj Lazar's money emergency hasn't hit yet. But they feel it coming. Fast.
The Lazars have three children -- Sarah, 16; Eddie, 11; and Ryan, 6 -- and a lot of nearly back-to-back college bills to prepare for. Plus, they're both 46, so retirement will follow close behind the college bills. That isn't making things any easier. What to save for -- retirement or college?
The couple have been saving for college and retirement simultaneously, with money set aside in Herb Lazar's 401(k) plan and an additional $200 per child per month going toward college. Any cash gifts the children receive also go into one of several college savings accounts. Chart: What they've saved so far
But college for their youngest could cost as much as $264,000. Short of hitting the lottery, the Lazars won't have enough time to save that much cash. Even with no debt, college still seems expensive
But no one says they have to pay the entire bill from savings. These days, few people do. The children may receive scholarships or grants, take out loans or find other sources of financial aid.
Families planning for college need to understand that most colleges depend on a single system for reckoning need and distributing aid. Knowing the system will help families anticipate how much aid they are likely to receive and how they can maximize that aid.
Applying for aid
The first step to qualifying for aid is to fill out the Free Application for Federal Student Aid form, known as the FAFSA. The form has questions for both parents and students about income, savings, tax filings, marital status and residency.
About three weeks after the form is submitted, a student aid report is generated. This will explain how much assistance students will be eligible for and how much money the government expects parents and students to pay (called the expected family contribution).
When it comes time to send a child off to college, families should not hesitate to fill out a FAFSA form. They should do so even if they think they earn too much to qualify for financial aid. It's important to keep in mind that not all aid is need-based. A student may still qualify for federal loans and other programs that offer favorable terms.
The FAFSA is available from many sources. Parents can check with their student's high school or the financial aid office of any college, or call 1-800-4-FED-AID. The application may also be filled out online, which cuts processing time by as much as two weeks.