updated 4/18/2003 5:35:16 AM ET 2003-04-18T09:35:16

College acceptance letters have gone out, and students are now deciding on which schools they’ll attend. As they make their choice, shriveled investment portfolios have left many parents wondering how they’re going to pay for it.

AFTER LOOKING at a number of schools, New Jersey high school senior Joe Palladino figured Delaware Valley College would be a good fit.

“It’s a good school and it’s not far away from home,” he said.

His parents agreed. But it costs more than they thought, and now they’re trying to figure out how they’ll swing it.

“I’ll try to fill the gaps by throwing less money in tax deferred programs and paying as much as I can out of my regular savings,” said his father, Joe.

Like many families, the gaps are wider than his father Joe and mother Pat had planned. Though they invested rather conservatively, their college savings have shrunk.

“They’re losing money themselves,” said college aid consultant Milton Eisenhardt, of College Money in Marlton, N.J. “So they’ve had less to spend for college as well as colleges having less and therefore not getting as much aid as they thought they would be getting.”

Joe Sr. works as an accounting manager at a drug company, and Pat stays at home. They don’t qualify for financial aid. Luckily, their son earned an academic scholarship, but it’s still not enough to cover the $26,000-a-year bill.

“On top of that we plan to fill the gaps with some loan programs like Stafford loans and New Jersey class loans,” said Joe Sr.

Most states have loan programs for students who live or go to school in that state. Students and parents can also get a pretty good deal on federal loan programs.

“Those rates that are already at their historic rates are going to go even lower,” said Kalman Chany, author of “Paying for College.”

Students can take out a Stafford loan, which is currently a bargain — at 3.46 percent while the student is enrolled and 4.06 percent during repayment. The rates change each academic year, but they’re capped at 8.25 percent. And the loan doesn’t have to be paid back until six months after your last class. The maximum Stafford loan for a freshman is $2,625, and a student can borrow a total of $23,000 over five years.

That may not go very far at a private college. But parents with decent credit can also add PLUS loans that let them borrow up to the full amount of tuition. The interest rate, now 4.86 percent, is variable and adjusts each year but is capped at 9 percent. And you need to begin repaying them after 60 days.

you may also want to shop around for private lenders — a better idea than raiding your 401k.

“You can go to a bank and get a loan for education, but you can’t go to a bank and get a loan for retirement,” said certified public accountant Gary Carpenter.

Some parents may tap into their home by taking out a home equity loan — or second mortgage.

“By taking out a fixed rate second mortgage on their house and prepaying tuition, they’re after-tax costs of borrowing might be as low as 3.5 percent,” said Chany.

But Eisenhardt, who also specializes in financial planning for college, advises clients against that since they have to start paying the loan back immediately.

“You have to start making payments as opposed to deferring payments to a later time when maybe you’re able to afford it,” he said.

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While most families will have to borrow to cover at least some college costs, begging — or appealing the school’s financial decision — is another option.

“If you can document a reduction in income, special circumstances, loss of job, loss of benefits, then the school can reevaluate your situation,” said Chany.

Joe Palladino certainly hopes Delaware Valley College will reevaluate his family’s financial needs in two years. That’s when the youngest Palladino heads off to college.

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