Gerber and Co., CPAs and Financial Advisors

No wonder you can't sleep. Your child is headed to college, and you have no idea how you're going to foot the bill. Sure, you were putting aside money regularly. But then came the recession and what New York Times columnist Ron Lieber calls the "perfect storm of ugliness." Tuition costs have risen at a time when you've lost income and equity in your home. And any savings or investments—including that 529 plan—have taken a hit. There's less financial aid available, and bankers have tightened up on the credit. All of which leaves your child facing the prospect of a mountain of student-loan debt upon graduation—if he can even get a loan. For many young people, that will mean delaying things previous generations took for granted: the first apartment, a car, marriage, even children.

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The secret to figuring out how to pay for college is to know your options and to start early in your child's life. Believe it or not, you've got options. Costs are indeed astronomical at many of the 371 schools that make the best-of lists. Of 3,500 colleges surveyed, though, 55 percent of students pay $9,000 or less a year in tuition and fees.

The trick is to figure out what will work best for your family. Here's the secret: While it may take a village to raise a child, it definitely takes a family to send one to college. If two or three generations work together, college bills can be paid without raiding parents' (or grandparents') retirement funds and without saddling students with crippling levels of debt. Simple sacrifices, advance planning, and reasonable expectations are the key.

Adding It Up

A typical path to paying the bottom line:
36% Parent income and savings
25% Scholarships and grants
14% Student loans
10% Student jobs and savings
9% Parent loans
6% Family and friends

Birth Through Seventh Grade Parents

Invest $50 a month in a college fund. Which kind of fund you choose matters less than saving regularly, perhaps through an automatic payroll deduction. In 18 years, a fund that earns 6 percent a year will be worth about $20,000. And that much per child, along with $20,000 in student loans and some belt-tightening while your children are in college (about $5,000 per year, roughly what you already pay to feed, clothe, and shelter one teenager), should be enough to pay the average four-year $60,000 tab, says certified financial planner Kevin McKinley.

Rumors circulate about families who scored big financial aid awards by saving nothing at all. But that's just another alligator in the subway. Your income, not your savings, will matter most to financial aid advisers as they decide how much aid to give you.

Some credit cards reward college savings. Upromise, the largest administrator of 529 plans, deposits 1 to 10 percent of purchases made with its World MasterCard directly into your Upromise account (upromise.com). You then transfer the funds into any of its 529 plans (529.com). Friends and family can also sign up to have their purchases credited to your child's account.

U.S. Treasury bonds (Series EE or Series I) are still a safe bet, immune to the stock market plunges that decimated many families' college savings earlier this year. The EE bond is guaranteed to double its value in 20 years, or the government will make up the difference. (You lock in a fixed interest rate, which varies depending on when you purchase the bond. Recently, that rate was 0.7 percent.) Some states also sell tuition bonds. Illinois, for example, offers 4.75 percent on 20-year bonds. You pay about $2,000 for a bond for a newborn, but it will be worth almost $5,000 by the time she's a junior in college (you don't have to live or plan to go to school there). Buy bonds at your local bank or brokerage firm, at treasurydirect.gov, or call 800-722-2678. Earnings are tax-free. But using bonds to save for college can be complicated. School yourself at findaid.org/savings/bonds.phtml.

Deposit birthday checks and other cash gifts straight into your child's college fund. Thank-you notes that emphasize that fact will encourage more of the same. Bolder still, set up a college savings gift registry at Freshman Fund (freshman fund.com) or Ugift (529.com).

The sooner you start saving for your child's education, the less you (or your child) will have to borrow later. But starving your retirement fund to feed a child's college account is never a good idea. You can always borrow to pay for college, but you cannot borrow to pay for retirement.

Willing Grandparents Grandparents can make a huge dent in a college bill if they, like the parents, start saving early. A $500 annual investment in a mutual fund averaging 6 percent will balloon to about $13,500 by the time the high school class of 2027 (born in 2010) marches off to college.