College savings trusts are state-run investment accounts, with returns based on the state's investment choices for the plan. If you have more than one student in your family, you can claim a credit for each. The new Lifetime Learning Credit is for college undergraduate and graduate expenses, as well as for some vocational training. You can take the deduction for the first 60 months of interest payments you paid on or after Jan. 1, 1998. Education loans you took out before that date qualify for the interest deduction, but only for the first five years of payments.
Federal aid is available for both students and parents.
Pell Grants and Federal Supplemental Educational Opportunity Grants are awarded only to students with exceptional financial need, as are low-interest Perkins Loans. Subsidized Stafford Loans are awarded based on financial need, and students are not charged interest until they begin repayment. Unsubsidized Stafford Loans are non-needs based and available to all students meeting eligibility requirements. However, because they're unsubsidized, students are charged interest from the time they receive the loan. Loans are for creditworthy parents meeting the general eligibility requirements.