How to pay for college, get the most bang for your buck

Applying for financial aid during the college application process can be tedious and tricky.

There are three types of aid families and students must focus on, John Tillman, president of Ecliptic Financial Advisers in Sea Girt, said. The first is need-based financial aid, based on a family's income and assets. The second is merit-based aid, based on a student's academic performance. The third is private scholarships, which represents the smallest overall area financially.

Filing for financial aid typically starts in October of a student's senior year of high school, when applications first become available. But Tillman said it's best to prepare as early as possible. Parents who have kids in middle school should start saving money for college and focus on how they're going to pay for it.

"What a family can do is they can look at the percentage of need that a school says they meet. So if a school is publishing that they meet 80% of a student's need or better, it's typically a school with a very strong financial aid budget," Tillman said. If it's lower than 80%, then it's a school most likely with limited resources.

Tillman also stressed that students should look to schools in which they would fall academically in the top 25% of the students of accepted applicants.That's a student's best likelihood of maximizing merit-based financial aid.

Tax deductions and tax credits change on a yearly basis. So Tillman suggested talking to a tax adviser on a yearly basis to see if your family qualifies for credits and deductions. There are phase-outs for income, so if a family qualifies one year, it may not qualify another year. If a family does qualify, Tillman said don't double dip. In other words, if a family pays for school using money from a 529 plan, but then also access a tax credit or deduction, the family needs to make sure it is not using the same expenses for credits and deductions.

When the Department of Education calculates a family's contribution to paying for college, Tillman said it's best for a family to also look at assets the DOE hasn't taken into consideration. That would be any retirement assets. That could include money a family has in a 401K, a 403B, an IRA, annuities or life insurance. Everything else will. So non-retirement assets will be looked at. Retirement assets will not.

Tillman said the bottom line with paying for college is that a student and his or her family needs to save money. It doesn't matter where you save it, but save it. Then he said to get creative when selecting schools.

"You want to look at schools with great financial aid budgets. You want to look at schools where your student academically falls in the top 25% to 30%. But then you also want to look at things like commuting to school for a year or two," he said. "That can save a tremendous amount of money on a yearly basis, and even look at some of our great community colleges."

He said two years of community college can really cut college costs in half over the course of four years.

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