Draw from retirement funds, but sparingly

When calculating a student's EFC, institutions exclude the value of 401k plans, individual retirement accounts, and insurance policies. Home equity is also typically left out, although some private universities are starting to include it.

You can take penalty-free withdrawals from traditional and Roth IRAs to pay for education costs. But be careful: The withdrawal will count as income on the next year's financial aid application. It also depletes your retirement fund, which is not a great choice for parents.