If I could, I would have preferred to start this article by telling you that, if your kid is motivated, you might finance college mostly on scholarships, work-study, student loans, and grants. Costs continue to rise, at the same time as much of the grant funding has dried up. I've decided to share the whole picture, and then some details about just socking money away, bit by bit, till there's a fund. There are tax-exempt ways to do that, though they're not quick and easy; and even here there's one big trade-off.

Let's first take a quick look at the big picture. I got it on the internet at FinAid: The Smart Student Guide to Financial Aid. Its first three topics are Loans, Scholarships, Savings. They're all informative and readable.

Federal loans to Students all have a financial need criterion. One type, called a Perkins Loan, is for students who can demonstrate exceptional financial need. The school acts as the lender, using federal funds. The student is responsible to pay 5% interest and repay in 10 years. The maximum amount available is $40,000.

Less stringent financial need is required by the federal Stafford loan, which is also made to the student.. There are two types. The Federal Family Education Loan is done by banks and credit unions, but is federally guaranteed. The Federal Direct Student Loan is made directly to the student. Interest on both can be deferred. Repayment is generally in 10 years, with some exceptions. The maximum available is $65,500.

There are also federal Parent Loans (PLUS Loans). These can be done providing the student is, for tax-purposes, a dependent. The parent, not the student, is financially responsible for interest and repayment in 10 years. These loans are available even if there is also a loan to the student.

A last-ditch alternative, of course, is getting a private loan: these will often allow you more time to repay, but generally they cost more, too.

Scholarships are still there. The trouble is that there are many worth about $100 and it's probably not worth your time to bother with them. Very few will come anywhere near the current costs, even for public institutions. Your best source is usually the college itself.

The FinAid site tells us that, according to the Bureau of Labor Statistics, the tuition component of the Consumer Price Index increased by 8% from 1979 to 2001. At present, parents can expect they'll need to come up with at least one-half the actual costs, maybe more, by themselves. Children born today will face costs that are three to four times current prices.

A business writer named Kathleen Pender does a column called NET WORTH for the San Francisco Chronicle. In a recent one, she gives a quick snapshot of what are called 529 plans (529 is the number on the applicable section of the Internal Revenue Service Tax Code). She compares a 529 to a Roth IRA (Individual Retirement Account): you get no tax-deduction for your investment, but money grows tax-free and remains tax-free when you take it out. Every state offers at least one such plan, and they differ widely. California's is called Scholarshare and is run by the investment firm TIAA-CREF.

You choose among three investments: a guaranteed-income plan; a stock-index fund; and a socially-responsible stock index fund. You're charged .8% of assets per year.

You have two choices in what you're buying. Under the Contract plan, you're buying years of tuition. This allows you to lock in future tuition rates at in-state public colleges. Under the Prepaid plan, you're buying units, each of which represents a fixed percentage of tuition.

I wish I had better news. Sad to say, every dollar you sock away in any 529 is counted against the money that might be available to the student as a student loan. Except for inflation, you might just want a piggy-bank. You decide.