Personal Finance: Considering options to pay for college

This is the season when high school seniors hope their families somehow can find a way to pay for the dream colleges that just accepted them, and parents spend sleepless nights worrying about the cost - maybe $200,000 for the next four years.

Generally, colleges give families about a month to ponder acceptance letters and talk with financial aid offices about obtaining more help. By May 1, students typically must indicate if they will attend in the fall.

Although Congress and President Obama approved substantial changes in the federal student loan program last month, many families will see little impact. If your income is less than $60,000, you might receive more help from extra Pell grant money allocated by the government. And if your income is above that level, colleges might be a little freer about handing out some of their own grant money, now that the government is helping more.

Last year, 18 percent of college entrants turned down their top school choice because it was too expensive and aid too limited, according to research by UCLA's Higher Education Research Institute. Colleges don't like losing students who have been accepted, so financial aid consultants advise parents to ask for more aid.

Here's what you need to know:

Pell grants: Most students can qualify for some aid. The best form is grants, which is money that does not have to be repaid.

Depending on your family and financial situation, you might qualify for a Pell grant of up to $5,500, an increase from the maximum of $5,350 this year, because the government is providing additional funding. The change was part of the recent health care overhaul legislation.

Student loans: Although the federal legislation changed the student loan program so that the government is no longer going to subsidize private lenders, the $61 billion in savings is going to have little impact on most students. Most of the money is going to Pell grants in the coming years. About $9 billion is helping the government pay for health care legislation.

Parents worried about paying for multiple college students can breathe easier if some start college in 2014 or later. Beginning then, no student will have to pay more than 10 percent of their adjusted gross income for student loan payments each month after finishing college. Now, the rule is 15 percent. If, after 20 years, the loans are not paid off, the government will forgive the debt. Now, it takes 25 years.

What families can do: For students preparing to enter college, now is the time to negotiate for a better financial aid package. Take your best offer to your top-choice school, say that finances are tough and ask for more aid. Colleges often respond to this because if students walk away from an acceptance, it can lower the school's standing on such lists as U.S. News and World Report's rankings.

If you have a talent that is attractive to a coach, academic department or admission office, find an advocate from the staff to help you with the financial aid office. If your SAT or ACT score is high compared with the average for a particular school, you also have negotiating power. Find averages on the U.S. News and World Report list. If you are from a distant part of the country or from a race or religion that's not common at the school, that might help.

If a family member has lost a job or incurred a major health expense, tell the financial aid office and write an appeal letter. Communicate with the financial aid director, not the person who answers the telephone.