For all the scare stories this spring about how hard it was going to be for students to get loans, the loan season is ending quietly with money secured. But I have a different take on this story. Why are we glad that students and parents find it so easy to get further into hock? Students who borrow are graduating with a median $20,000 in education debt that schools know about (that doesn't count direct loans from other places where students borrow, like banks). Kids have no idea how tough it could be to repay or what might happen if they can't (for some horror stories, see studentloanjustice.org). Families starting to think about college should troll for places they can afford, while borrowing as little money as possible.

The colleges themselves know that loans are getting a bad name. Sixteen high-cost schools— including Amherst, Haverford, Lafayette, Oberlin and Stanford—provide financial aid entirely in the form of free grants, even to students with higher incomes. An additional 28 schools have adopted no-loan policies within certain loan or family-income limits.

Still, you have to read the fine print. In most cases, your free grants fill only your "official" need. That's the difference between what the college costs and what you, as parent and child, are expected to pay. Your "expected contribution" derives from a formula that considers your income and assets, and you're going to owe more than you think. For an idea of the amount, go to projectonstudentdebt.org, which lists the pledged no-loan schools and estimates your residual cost. Brown University, for one, cost $48,660 in 2007–08. Parents earning $80,000 got a 59 percent discount but still owed a fat $20,095. Most likely, they covered at least part of it with a loan.

An alternative strategy is to look for "merit aid." These are tuition discounts awarded without regard to financial need. Schools offer them to students they particularly want—for their good grades, athletic prowess, leadership or other talents. Higher-income families collect along with everyone else, not only at private schools but at the publics, too. About 60 percent of the aid provided by four-year public institutions goes to students who, on paper, don't need financial help, says Sandy Baum, senior policy analyst for the College Board.

Fourteen states offer grants to resident students with at least a B average who attend a state school. In some states, that's four years of free tuition and fees, and a great education, too. The dollars "go predominantly to the white or Asian upper-middle-class," says Donald Heller, director of the Center for the Study of Higher Education in University Park, Pa. On average, other minorities and low-income students have poorer grades.

Lynn O'Shaughnessy, author of an excellent book called "The College Solution," has some advice for students hoping to bag some extra merit aid: apply to schools where you're in the top 25 percent academically (College QuickFinder at collegeboard.com, shows you the SAT college-prep-exam scores of the students each school admits). Apply to fine but lesser-known schools in distant states (schools like to diversify geographically). Look at gender balance. Men are more likely to get awards at schools where women approach 60 percent of the student body. Type "scholarship" and your SAT or ACT score into Google. The names of some schools will pop up that offer awards at that level. Drill down into college results.org to see what percentage of a school's students graduate in four years (every extra semester costs a fortune).

In the end, line up the acceptable offers and pick the one with the least debt. When you leave school, you'll be three jumps ahead.

Reporter associate: Temma Ehrenfeld

© 2008