Planning for college financial aid is like trying to steer a car on an icy patch of road.

While it’s a nerve-jangling and frequently counterintuitive experience, planning ahead and avoiding obstacles will improve your aid prospects.

A Milwaukee-based financial planner who has two children in college (Stanford and Georgetown), Paula Hogan, finds the whole college financing process agonizing because of its complexity and emphasis on gaming the system.

“For many kids, the first real contact they have with the adult world of finance is the financial aid system, which unfortunately at the moment is a system that if you don’t participate in gaming it, you lose a lot of money,” said Ms. Hogan of the aid morass.

One stalwart rule in aid planning is to keep as much money out of the child’s name as possible – if you think you will qualify for financial aid. Assets in a child’s name are “taxed” or penalized in the aid calculation at a rate of 35% in the federal guidelines versus only 5.64% for parental funds.

That means possibly eschewing the use of trusts or Uniform Gifts to Minor Act accounts, or UGMAs. The more money that’s in one of these vehicles, the more aid is reduced.

Surprisingly, even assets in prepaid 529 state plans – which lock in tuition dollars in the form of credits offered at time of matriculation – should be avoided.

Prepaid tuition plans essentially put aside tuition dollars for specific state or private schools. Instead of funds earning a direct rate of return, you are locking in tuition with today’s dollars. Your investment is also guaranteed to keep pace with the rate of tuition increases.

“A lot of people don’t know that prepaid 529s can reduce aid dollar for dollar,” Ms. Hogan said. “The distribution [payment to student] from these plans is considered a student resource [income].”

Consider a sister version of prepaid plans – called 529 savings programs – if your family isn’t committed to a particular school or state. These plans, sponsored by states but managed by mutual fund companies, allow you to withdraw money free of federal and most state taxes for college expenses [until 2010] at any university.

You need to be careful with these programs. More than 80% of 529s are sold through financial advisers and brokers. That means sales charges and higher management fees, which you can avoid by investing directly in a handful of low-cost 529s. Some of the least-expensive plans are offered by Alaska, Michigan, Nevada, and Utah.

As with all 529s, first check whether your home state offers a state tax break, then weigh that write-off against its expenses and similar – and less costly – out-of-state plans.

If your child is attending college in the fall, you should have completed aid forms by now, including the Free Application for Federal Student Aid or FAFSA, the standard application for federal aid programs.

Already submitted your forms? Then be on the lookout for a Student Aid Report, which comes two to four weeks after the application for federal aid form is submitted, according to the College Board, the college information and testing service.

The aid report will note your Expected Family Contribution (front page, upper right), which will specify how much you are expected to contribute toward the education bill. You should be receiving a financial aid award letter sometime in April.

To ensure that you will receive the best possible aid package, make sure that:

* If there are any errors on the aid report, list them and mail the report back immediately.

* Any unusual financial circumstances should be noted with college financial aid officers. Are you paying for care of an elderly parent? Expect to be laid off soon or experience a large financial loss? Other children in college? Mention everything that will impair your ability to pay for college.

Where the assets are placed has a major impact on how aid is given.

Unless you are applying to a college that takes into account home equity and retirement assets, consider prepaying your mortgage, paying down consumer debt and accelerating major purchases to cut your available cash balance.

Also think of college financing as a family project. If grandparents will be helping, ask them to contribute to a 529 plan they set up, so as not to hurt their grandchildren’s aid chances now. They can also pay tuition bills directly or loans after graduation.

Ms. Hogan says that much of her college planning is done with grandparents. Assets set aside by grandparents are not only excluded in aid formulas, they can reduce estates, a favorable move in lowering estate taxes. Just remember that some gifts may diminish a child’s aid prospects.

There is no rigid rule on who qualifies for aid, so you should always apply. A complex formula is applied and weighs your income, the amount of income and assets attributed to your children, number of students you have in college, and your basic ability to pay.

If you want to increase the chances of getting aid even more, you should consider going back to school. While this largely depends on your ability to afford your children’s and your education bills at the same time, you may get a break.