The 4 Rules of Paying for College in a Recession - Tips on Borrowing Money for Education

The 4 Rules of Paying for College in a Recession
December 15, 2008 10:24 AM ET | Kim Clark

Although I've been writing for years about financing college, I've never before received so many letters like this one from Philip I., who is a mortgage consultant in New England: "I am panicked. My son is a junior in high school. Any ideas would be helpful." Many parents are reeling from big financial losses at the same time they are shocked by college price tags, confused by all the nitpicky rules, and scared that they'll ruin their children's future if they can't figure out some way to get them through college.

Luckily, we've put together advice from financial aid experts—including lots of parents who managed to pay tuition without going bankrupt. A basic primer to financial aid can be found here.

While every student and family is unique, there are four principles that apply to everybody:

1. Grades matter more than ever. The better the student, the more college options the student will have and the more likely it is the student will receive scholarships or win admission to a low-cost school. Students in states such as Georgia, Tennessee, New Mexico, and Florida, with grade-based scholarships, particularly stand to benefit. Parents wanting to motivate their sophomores and juniors can direct them to college websites such as this one, this one, or here. Each of these sites clearly shows the reality that the better the grades and test scores, the bigger the scholarship. Spend a few extra hours studying, bring your grade point average up a point or two, and it could pay off in tens of thousands of dollars.

2. Early birds will get more scholarship worms . Next fall's high school seniors need to start applying for scholarships AND admission to low-cost schools in the early autumn—before November 30. And they need to fill out the Free Application for Federal Student Aid as soon as possible each January, because some aid is handed out on a first-come, first-served basis.

3. Students should apply to at least a couple of affordable schools. Anyone who applies just to one "dream" school should prepare for heartbreak. Colleges know (from the FAFSA) what other schools students are applying to. Some aid officers will lower an aid award if they know the student doesn't have any alternative.

Which schools are affordable? Your area community college is always a good bet. And an in-state public college or university is usually comparatively affordable. To help you choose among public universities, here is our list of the public schools that score the highest in our rankings of reputation, graduation rates, and selectivity.

Some private colleges are also comparatively affordable. Here is our list of colleges that we feel are the best bang for the tuition buck.

4. Students should apply to at least a couple of generous schools . Some of the most expensive schools by sticker price also give out huge scholarships and can actually be cheaper, in the long run, than public schools for many students.

Students from low- and middle-income families can focus on schools that award aid based on the family's income. Here is a list of schools that claim to meet the full financial need of students.

Students who fear that their family earns too much for need-based aid can check out our list of schools that hand out lots of "merit" aid, which is awarded regardless of a family's income. Here is advice on how to increase your odds of getting merit aid.