NEW YORK ( MainStreet) -- The increasing severity of the student debt crisis has those saving for their children's or grandchildren's college education spooked. And who can blame them? Total student debt in the U.S. weighs in at a whopping $1 trillion, and the cost of college tuition has grown at an unsustainable pace--up 1,100% over the last 35 years. That's, in part, why the portion of 25-year-olds with student debt jumped to 43% last year compared to 25% in 2003. To make matters worse, more than 40% of recent college grads are unemployed--with nary any prospects to pay down that debt. Understandably, the families saving for college down the road look at these figures and feel anxiety.
In fact, 71% of people helping to pay for college are worried about the financial burden, according to a new nationwide survey conducted for MainStreet by GfK North America. Those trying to get ahead of the game and accrue a college fund are saving an average of $6,790 annually, according to the survey. The run-of-the-mill savings plans are popular with 53% using a straight savings account, 24% opting for a 529 or prepaid tuition plan, 13% using life insurance and 11% going with a Roth IRA. In fact, the more money you make, the more likely you are to use an advantaged 529 plan, with 24% of those with incomes over $75,000 opting for the 529 compared with only 19% of those with incomes under $75,000. But those trying to save big for prestigious private schools may be less than enthused with their return on investment: the lifetime earnings advantage of college graduates over those with a mere high school degree is pegged at $279,893--just a tad more than the cost of a top four-year institution. The mounting tuition costs and ROI considerations are enough to worry Joseph Orsolini, a CFP in Glen Ellyn, Ill. who is saving for his two sons--in first grade and fourth grade--to go to college. Since his kids were born, he's used a Coverdell Education Savings Account (a tax-advantaged plan similar to a 529) and saves $100 monthly while kicking in extra for birthdays and Christmas to max out the $2,000 annual limit. He's also considering adding an in-state 529 to take advantage of the Illinois 529 tax credit. "I am highly aware of and anxious about the future cost of college," he told MainStreet. "The choice is either write lots of small checks over a long time or a few big checks when they go to college. Smaller checks are easier." Orsolini also has a few tricks up his sleeve: he realizes that room and board together costs about $9,000 annually, and so he may think about having his kids choose a school nearby so they can live at home for a few years to net significant savings. And he's not alone in more actively weighing the benefits of alternative education routes, according to Michael Fitzgerald, chair of the College Savings Plans Network and State Treasurer of Iowa. "Some of these students going off to schools...really like art and art education, but it's a four-year degree and I pay $80,000 to 100,000 for it?" Fitzgerald said. "Is that worth it? Is that the right way to go about it?" 529 Plans and their ilk are in place so that people can be prudent for their financial future, but those paying for college are also getting more discretionary about which schools are worth the money. "Families are looking at is college worth it and what college is worth it?" Fitzgerald said. "Is training and education worth it? The Ivy League, if you don't have the money--maybe it's not worth spending the rest ofyour life trying to pay off." In other words, why pay a hefty tuition price tag if your kid is going to end up unemployed and living in your basement as you pay off debt? That's why, beyond the typical savings mechanisms to foot a huge bill and general penny pinching, those planning ahead for college would do well to opt for a few outside-the-box savings options to avoid getting saddled with debt. 1) Think in State The University of Virginia costs $37,000 for carpetbaggers but only $12,000 (a third of the price) for those in-state. Yet, you don't necessarily need to be a resident to score the discount. In certain parts of the country, states are grouped together as "acadmic common markets"; in one such contingent, the "New England Board of Higher Education" includes Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont and allows out-of-state students in the region to apply for in-state tuition if they're planning to major in a subject not offered in their homestate public universities. 2) Go to a public institution or start at a two-year school New York University is the most expensive private school (with an annual price-tag of $60,407), but according to the National Center for Educational Statistics, the annual price for public colleges is more than $18,000 less than the average price of private ones. To boot, students can net savings by starting out at a junior college for a couple thousand bucks a year and finish up at a four-year university. Maybe that's why of those surveyed who have children in college, 22% are sending the children to a private four-year institution, whereas only 11% of those looking down the road to send their children to college and use their savings are anticipating a four-year institution, according to the GfK survey. 3) Go over the border Scotland's St. Andrews and the University of Edinburgh--not to mention Trinity in Dublin Ireland--are prestigious institutions at a fraction of the cost of American private schools. To boot, McGill University and Concordia University in Montreal are 3/5 the cost of tuition at comparable private institutions in the U.S. 4) Go with an MOOC (a massive online open course) MOOCs first appeared on the higher education landscape in 2008 but gained traction when top universities endorsed them and provided access to their courses. The popular providers of MOOCs include Coursera, Udacity, edX and NovoEd. You can get a top education without paying $50,000 a year. In fact, MOOCs are evolving with Coursera recently announcing that it will soon add an "app platform" to allow universities to add interactive instructional tools. Coursera also offers certificates for courses at fees ranging from $30 to $100. The legitimacy is ever expanding: the American Council on Education recently approved five Coursera courses for degree credit. 5) Get Crafty The Department of Education College Affordability and Transparency Center generates reports based on your selected criteria and emphasizes value. It reveals that tuition in the U.S. is only $910 at the private Berea College in Kentucky and somehow almost half that ($430) at that lowest-priced public school: Haskell Indian Nations University in Kansas. It may not be Harvard, but with tuition that low, you'll save some $224,000 over the four years. --Written by Ross Kenneth Urken for MainStreet