The good news: Junior got into college. The not-so-good news: It's going to cost you.

It's time for the annual ritual when families fill out the Free Application for Federal Student Aid, wait for the aid letters to roll in and then sit down to decide which school is "the one." And in many cases, the final price tag can trump a great curriculum, sprawling campus and renowned professors.

Jason Schneider

That's why having a frank, open conversation with your child about the family's financial options is one of the most important steps you take when choosing a school, says David Childress, a vice president at Student Aid Services, a provider of research and tools to college enrollment and financial-aid offices. That includes discussing ways to make the most of scholarships, grants and other aid.

There is more than $236 billion in student aid, such as loans, scholarships and grants, available each year, according to Student Aid Services. Undergraduates receiving aid get an average of $13,218 per year.

Here's how to begin your conversation:

1. Dissect and compare each award letter.

Once you receive the financial-aid award letters from all the schools, it's time to sit down as a family and compare them—carefully. There is no standard format for award letters so the information contained in each can vary widely.

Typically, a letter lists financial aid from multiple sources, such as school scholarships, work-study money and federal loans, along with your expected family contribution. Some schools outline the cost of attendance, including tuition, room and board, and miscellaneous expenses like books, according to financial-aid site Some just include tuition and fees while others don't include the cost of attendance at all.

Jason Schneider

To help with the math, colleges and universities participating in federal student-aid programs are now required to have a net-price calculator on their websites. The tool estimates the cost of attendance, including tuition and fees, room and board, books and supplies, transportation and personal expenses. Then it subtracts any aid, such as a Pell Grant, scholarship or loan, the family expects the student to receive. You'll need to input information such as parental income, household size and number of children currently in college.

Leslie Tobakos, mother of two college-aged kids, compared apples to apples on tuition, room and board and fees by making a spreadsheet to track the bottom line for each school. She wrote down all the names of the schools her daughter had applied to and realized they were all over the country. Some schools were farther from home, like Claremont McKenna College in California. She had to consider travel expenses, including trips home for the holidays.

"I didn't care how much money they were giving us," says Ms. Tobakos, who lives in White Lake, Mich. "I cared what the bottom line would be."

2. Do the family math.

Once you've determined exactly how generous each school is—or isn't—being, you'll need to calculate how much your family (the parents and the student) will need to dish out.

Spell out how much you'll pay each semester and what that money covers. It could include tuition, room and board. Take into account aid that covers only the first year and how you'll make up the difference the following years.

Then specify which expenses your child will be expected to pay for—say, dining out, books and activity fees—and how he or she come up with the money.

Kate O'Connor, a senior at Michigan State University, works about 25 hours a week through a work-study program and about 20 hours at a part-time job to help with costs not covered by loans, scholarships and grants, because her parents couldn't afford to contribute.

3. Find free money.

That duct-tape dressmaking may be your ticket to some extra cash for college.

There are scholarships to fit just about any group or niche. (Yes, even duct tape.) Sites such as, and list many options.

If Junior plays a sport for school or a league, for instance, he or she should look into the $500 BigSun Scholarship ( If your teen is a leader—say, for a school group or in your community—look into the $2,000 Discus Awards College Scholarship (

Ms. O'Connor landed a scholarship from Kentucky Fried Chicken worth more than $20,000 over four years. It's geared toward high-school seniors with financial need who pursue an education at a public institution in their home state.

Students may be eligible for state aid. Many companies offer scholarships to children of employees. Children of veterans may qualify for awards as well. And families also should reach out to civic, religious, community and ethnic groups.

4. Consider a payment plan.

Many schools—public, private, large and small—offer tuition payment plans that generally don't charge interest rates. There typically is a one-time, upfront fee of about $50, and you make monthly payments—the monthly amount is based on the family's income level—says Charlie Rocha, senior vice president of student lending at Sallie Mae. You can either apply directly through the school or the payment-plan provider.

5. Look at your loan options.

In the end, your family may have no choice but to borrow money.

First look into federal loans, which typically have the lowest interest rates. The subsidized federal Stafford Loan currently has a fixed interest rate of 3.4%. The federal PLUS loan for parents has a fixed rate of 7.9%. Perkins loans have a fixed interest rate of 5%. You can apply for these with the Fafsa. (Go to Private bank loans should be your last option since they tend to have higher rates.

Be sure to discuss the post-graduation implications of a loan. That means spelling out payment amounts, when they will start, how long they will last and the overall cost over the life of the loan.

Write to Emily Glazer at