(MONEY Magazine) – If you're a parent studying the forecast for college tuition, you're probably getting the same reading that Federal Reserve chairman Alan Greenspan did a while ago as he examined the latest economic data: The outlook is decidedly mixed.

First, the good news: After years of "irrational exuberance" during which colleges routinely hiked annual tuition at more than twice the inflation rate, cost increases have slowed. Tuition and fees climbed about 5% in each of the past four academic years and are expected to rise 5% in 1997-98, to an average of $13,537 at private schools and $7,855 for out-of-state students at public campuses. In addition, as we went to press, President Clinton and Congress were negotiating his proposal to provide annual tax credits of as much as $1,500 for college students or their parents through the year 2002.

Now the storm clouds: More kids entering college are seeking aid--76% of students in 1996, compared with 66% a decade earlier. At the same time, the prospective pool of college applicants is steadily increasing, as the number of 18-year-olds grows from 3.4 million in 1994 to 3.7 million this year and 4.1 million in 2006. This means that while just a few years ago colleges were scrambling to fill their classrooms--creating a buyer's market for parents trying to bargain down yearly tuition and other escalating costs--schools can now afford to be tougher.

Still, there are a slew of effective strategies for slashing your child's college costs by 30% or more. Before we tell you about them, however, let's review the basic rules of financial aid--essentially grants, which are gifts, and loans, which of course must be paid back.

A record $50 billion in aid is available from federal, state and institutional sources, vs. only $28 billion 10 years ago. Federal grants (which totaled roughly $8 billion in 1996) and most state grants are awarded on the basis of financial need. Generally, if your family's annual income exceeds $80,000--and in some cases, $60,000--your chances of qualifying for federal or state need-based aid are slim.

Anyone, regardless of income, is eligible for a federal college loan (see "The Best Ways to Borrow to Pay the Bills" on page 138 for details). Beyond that, if you can't qualify for need-based aid, you'll have to negotiate for financial help from a college's own funds or other private sources. Here are the strategies that work best. (Also see the box below to learn four time-honored money-saving techniques.)

--Be flexible. "Colleges are hiring firms to figure out how much aid it will take to get a certain kind of desirable student," says Howard Greene, an education consultant in Westport, Conn. "And a school will offer that package to the students it really wants."

Thus your child's financial aid offers can vary widely. To get a broad range of offers--as well as to be assured of admittance to a school--most college counselors advise applying to eight to 10 colleges. "There's a lot more disparity these days," says Kalman A. Chany, author of Paying for College Without Going Broke (Random House/Princeton Review Books, $18). "The same student might get no aid at one school and $20,000 in aid from another." That's why college advisers increasingly warn students against setting their hearts on attending a particular institution.

Nobody is suggesting that cost should be the primary factor in choosing a college. "However, it's important not to treat this as an emotional decision but as a business one," says Brad Barnes, a college counselor in Denver. "There are a lot of schools out there that will be a good fit for your child."

Indeed, that's what 17-year-old J Duncan of Atlanta found out. With a 1,500 SAT score, he was snapped up by his first choice, Duke University. Because of J's academic and leadership strengths, Duke offered $17,260 in grants, loans and work/study, leaving his parents to come up with $12,140. "We told J we would make any sacrifice if Duke was his dream," says his mother Nin Garrett. "But it would have been quite a burden for us." After they asked the Duke financial aid office if it could do better, the school upped its offer to $19,330, which would still have meant an ongoing financial struggle.

Then J learned that lectures for his freshman biology class would be in a hall filled with 250 students and that the laboratory discussion groups would be led by teaching assistants. He took a closer look at the curriculum and smaller class sizes at Washington and Lee University, which had offered him a full-tuition scholarship, and accepted the offer. "J felt that, while Duke had the prestigious name, the quality of education at Washington and Lee would better suit him," Nin says. J's choice will save his family about $21,600 over the four-year period.

--Play hard to get. With 481 colleges now offering early admission, compared with 399 five years ago, students may feel increasingly tempted to apply as early-decision candidates. Unfortunately, doing so may place your son or daughter at the end of the line of those waiting for financial aid. "If you show that kind of commitment to a college, it doesn't have to use a nice financial aid package to entice you to enroll," says Carol DeLucca, who heads an education consulting firm in Atlanta.

Some advisers go so far as to recommend that college applicants squelch any act that could be interpreted as a sign of overenthusiasm for a school, such as asking for an on-campus interview when one isn't required. "There is some anecdotal evidence that a student interviewing on campus will get more loans than grants," says Morton Schapiro, dean of the College of Letters, Arts and Sciences at the University of Southern California and co-author of the forthcoming book The Student Aid Game (Princeton University, $29.95). "The thinking is, if you're that eager about the school, you're going to enroll regardless of the aid package."

The trick, say the experts, is to reverse the enthusiasm: Make the school eager to have you. For example, someone who wants to study in one of a college's most popular, prestigious programs--say, premed at Johns Hopkins University--is less likely to command a fat aid package; the school has many exceptional candidates on its waiting list. But if your child excels in an area where a college is trying to build up prestige--say, the music department of a school noted for its engineering program--you may be able to negotiate a great deal.

--Learn the new safety game. Traditionally, high school guidance counselors have advised students to apply to a "safety school"--one that is sure to accept them. Now students are also being urged to apply to a financial aid safety school. That's a college your child wouldn't mind attending and you could reasonably afford--or a college that will be so eager to have your child that it will offer a substantial financial aid package. To find such an institution, take a look at a college's freshman class profile, available from college guidebooks. Pay particular attention to the typical high school class rank and standardized-test scores. You're looking for a school where your child rates academically in at least the top 25% of the applicant pool.

--Cast a wide net. Grants now make up just 42% of aid provided by the federal and state governments and colleges, down from 48% a decade ago. So if you're seeking money you or your child won't have to pay back, you may have to find it elsewhere. The best source: private-sector scholarships. These awards are based on a range of qualifications, including ethnic background, work experience, community involvement and assorted extracurricular interests.

How can you locate sources of scholarships? Check your high school library or your local bookstore's college section, where you'll find guides such as Don't Miss Out! The Ambitious Student's Guide to Financial Aid, by Robert and Anna Leider (Octameron, $8), and College Scholarships and Financial Aid (Macmillan/Arco, $24.95). And use your computer to log on to one of the free databases offering scholarship information. The Financial Aid Information Page (http://www.finaid.org) provides links to more than 1,000 sites posting scholarship information, including Fastweb (www.fastweb.com), which has 180,000 scholarships on file.

--Negotiate nicely. If you're unhappy with a financial aid offer, bargain. As your mother told you, however, there is a right way and a wrong way to do things. "Colleges are almost always willing to talk about an aid package--but only if you keep the conversation constructive and positive," says Christopher Hooker-Haring, dean of admissions at Muhlenberg College in Allentown, Pa.

Request in writing that the package be reviewed, noting any financial difficulties that have occurred since you filed the original aid application. And be prepared. Keep copies of everything, including the application and your tax returns. That way, if you feel there was a mistake in the school's calculation, you'll have evidence to back up your claim. You might also photocopy aid offers from schools that can be used as leverage in bargaining with the college your child really wants to attend.

Finally, don't look just at the total aid package. Let's say that after initially offering you $10,000 in aid, a school ups that amount to $14,000. Pretty good, huh? Maybe not--if the extra $4,000 is a loan. If that happens, ask whether some money can be shifted out of loans and into grants or work/study. After all, if your child can't meet the payments on student loans after graduation, he or she just might end up having to move back home with you.