College Costs: Coping With The Meltdown

American is planning to create a pool of cash for needy students who already have financial aid, according to Maralee Csellar, a university spokeswoman. In addition, "we are looking into ways to help students who do not have aid," Csellar says. Tuition for the 2008-2009 school year is $41,000 for a full-time student, including room and board.

Even before the market swooned, families with college-bound children started to buckle down. According to preliminary results of a survey of more than 2,000 parents being conducted jointly by ApplyWise.com and Next Step magazine, a majority of families with college-bound teens redirected their child's college search in the past six months to more economical options, including four-year public colleges, according to the preliminary survey data. In addition, parents say they are cutting discretionary spending to save more for their child's college education.

What can you do to pay -- and even save -- for college in a dicey market? Here are savvy moves to make now:

Hit the Financial Aid Office

If you have your college savings in a 529 plan, you should be in decent shape, since the asset allocation models in these programs direct most college savings in cash and bonds as college nears. But if you are winging it and have the bulk of your educational savings tied up in stocks, there's not much you can do now.

In fact, if you have a 529 account that has lost a lot of money and you have more than one child, consider switching the beneficiary on the 529 plan for a college-bound child to a younger sibling. "It will buy you more time," says William Jordan, president of Sentinel College Funding , which offers financial planning advice in Laguna Hills, Calif.

If you need alternative sources of funding, experts say your best bet is to try your school's financial aid office first, even if you didn't qualify for aid in the past. "What I've learned from my experience working in financial aid offices [at Brown University and Columbia University] is that there's a lot of flexibility involved," says Rod Bugarin, a financial aid adviser at ApplyWise, which offers online college admissions guidance.

Emergency Loans Available

It's a little-known fact that many schools offer emergency loans to needy students. While these loans won't cover the entire tuition bill, they can provide some immediate relief: The biggest emergency loan Bugarin awarded when he was working in a university financial aid office was several thousand dollars.

Other kinds of loans are also available to students, including a Perkins Loan, which is administered by individual educational institutions. Under the Perkins program, undergraduates are eligible for $4,000 per year and graduate students can receive up to $6,000 annually, with maximums of $20,000 and $40,000, respectively. Other financing options include a Stafford Loan, which can cover up to $7,500 in costs for borrowers. In addition, parents or guardians of undergraduate students can get a PLUS loan, which is non-need based and has a current interest rate of 8.25%.

Keep in mind that colleges do not reassess financial aid packages for a drop in portfolio assets. However, more often than not, schools will reassess financial aid if there is a change in employment status.