The ABCs of college financial aid

Meanwhile, those with high school sophomores and juniors may want to take a close look at how they hold their assets before the year ends, since the economic "snapshot" that's taken Dec. 31 of a student's junior year can have a significant effect on the aid that child gets later.

"You've got to be assertive with the process," said Kalman Chany, author of "Paying for College Without Going Broke." "The theory is that student aid money goes to the people who need it; the reality is that it goes to the people who know how the system works."

The best strategies to maximize aid will depend on where your child is in the college process. The earlier you plan, the better your options. So getting educated and involved even when your child first starts high school is smart. But you're not out of luck even if your student is in his or her junior or senior year of college.

Here's what you can do and when.

At least two years before college application

AP classes: Advanced Placement classes taken in high school can count as college units, if the student both passes the class and the requisite AP test following it. Although schools differ on how they accept the AP units, good grades in these classes almost always boost a child's grade-point average and make the student more attractive as a college prospect. The more attractive the child is to the college, the more accommodating officials are to the need for aid, said Chany, who runs Campus Consultants in New York. Better yet, schools that accept AP units allow the student to take fewer college units, and that usually means lower college bills.

PSATs: High school sophomores and juniors should focus on studying for PSATs. The PSAT results are not provided to colleges. But the student's score determines eligibility for National Merit Scholarships. These generous awards are given only to those who score within the top 1% of their state's graduates, and who have both excellent grades and excellent recommendations from teachers. That makes the awards rare. Of the roughly 1.4 million students who take the PSAT each year, only about 8,000 win the $2,500 grant from the National Merit Corp.

But becoming a National Merit finalist can trigger eligibility for generous school-based merit scholarships that can range from several thousand dollars off tuition costs to a full ride. So studying hard for this test can reap many rewards. Roughly 34,000 students each year receive commendations from National Merit Corp., recognition that improves the college application and often leads to bigger helpings of college-based aid.

School selection: When narrowing your school search, investigate the schools' approach to aid (and, where applicable, to accepting AP units). Some costly private schools are so generous with aid that their sticker price can be misleading, while other schools that appear cheap on the surface become comparatively dear once aid, or lack thereof, is factored in.

Consider, for example, a student weighing whether to apply to Stanford, USC and UCLA. The first two are pricey private colleges that charge upward of $57,000 annually in tuition, fees, and room and board. UCLA is a public school that estimates total cost at $31,000.

Both private colleges, however, provide substantial aid, giving scholarships and grants to roughly 60% of their students. In fact, Stanford's grants are so generous that the average net cost of the college drops to just over $21,000 versus about $27,000 at USC. In addition, Stanford's generosity with lower- and middle-income students can make a Stanford education cheaper than going to a public college or university. For instance, for families earning less than $48,000, Stanford's net cost is $5,946. A family earning $48,000 or less would pay an average of $16,436 at USC. This same family would pay a net price of $9,720 at UCLA.

Where can you find these numbers? The data are gathered and published by the National Center for Education Statistics' College Navigator site. Use the search bar in the upper left rail to look up your targeted schools. Then compare the sections under the headings "tuition & fees," "financial aid" and "net cost."

Manage family assets: When you have a few years to plan, there are three things to keep in mind.

• Financial aid formulas figure that all the assets in a student's name will be used for college over a four-year period, while parents will be able to use only a small portion of their assets for each child's college bills. Thus, the fewer assets in the student's name before applying for aid, the better. Assets cannot be legally transferred from one person's account to another simply for the purpose of getting better aid. But if you need to spend money on your student for something like a computer or car, it's smarter to have the student spend his or her assets. That leaves you with the same amount for college, but in better shape for aid.

• Retirement assets are not counted at all in the federal aid formula. But retirement contributions are added back into income for the financial aid base year — generally the student's junior year in high school. Contribute as much as you can to retirement accounts while your child is younger. That gives you a savings cushion, just in case you can't afford to contribute later.

• Home equity is not counted in the federal financial aid formula, but may be counted in the "profile" formula that's used by some private schools. If your child is likely to attend a public college or university, paying down your mortgage can give you the ability to refinance before college to lower your mortgage payments. That gives you better cash flow when you are paying for college and doesn't hurt you when applying for aid.

At least one year before college application

Check the EFC: The College Board in New York processes aid applications and gives parents a good idea of what to expect through a Web-based calculator of the family's Expected Family Contribution — EFC for short. The benefit of this calculator is that it tells a family roughly how much it will be expected to contribute, no matter what school is chosen. Thus, you can get a quick snapshot of how easy or difficult college may be to afford and whether you'll need a backup plan.

The federal government, however, now requires all colleges to have a net price calculator on their websites as well. If your child has a target school, you may be able to get a more accurate estimate of the school's net cost using that.