There's no way around it - education is getting more expensive. The following chart compares the average tuition cost for several types of colleges and universities in 2007 against what they are expected to cost in 2015 and 2025:

The chart assumes the following average annual tuition inflation rates for each type of school: Community Colleges, 5.0%; State System of Higher Education, 6.0%; State-Related Universities, the inflation rate begins at 5.80% and rises to 7.4% over the displayed period; Private Four-Year Colleges, 7.0%; and Ivy League Colleges, 7.0%. Although these projections are based on historical and projected rates of tuition inflation at each type of institution, there can be no assurance that they will accurately reflect future increases. Projected tuition rates do not represent actual tuition costs at a specific school. Tuition inflation projections and calculations provided by Actuarial Resources Corporation.

These are big numbers, but they don't have to be out of reach. Most families use a combination of ways to pay for college - current income, loans and savings. Of these methods, saving and investing even a little each month is one of the best ways to make college more affordable.

Saving (even a little) beats borrowing - Big oak trees grow from tiny acorns, and the same can be true of saving over the long haul. While most families combine some level of saving and borrowing when paying for college, putting aside money early and often is a proven way for you to build your savings. Due to the power of compounding, saving and investing even a little each month is more cost-effective than borrowing money and paying interest on it.

Maximizing your savings using tax-deferred and tax-free growth
One of the best ways to save for your child's education is to use tax-deferred and tax-free investments.

"Tax-deferred" means that as your investments grow you do not pay taxes annually - as you may do, for example, on bank savings account interest. The benefit of tax-deferral is that you have more money available to grow and compound each year.

"Tax-free" means that you do not pay any taxes, even when you withdraw your savings and accumulated growth. The combination of tax-deferred and tax-free savings means that all the earnings can be used for college and that none is lost to taxes.*

Let's do a side-by-side comparison of the effect that taxes can have on college savings. We'll begin this comparison by investing $3,000 using a taxable investment - say, a taxable mutual fund - and adding $100 per month to that account for 18 years.

• Assume each year your account earns 7.5%.
• Each year, you pay taxes on the growth from this account at your combined federal, state and local income tax rate, which is assumed to be 30%.
• After 18 years, your account grows to $40,972.

Now let's see what happens when the same contributions are made in a tax-deferred and tax-free investment:

• As with the taxable investment example, assume each year your account earns 7.5%.
• Unlike the taxable investment, you pay no taxes on your account's growth while it is in the account or when you use the account to pay for qualified college expenses.
• Your account value grows to $55,193 - $14,221 more than the taxable investment.