Teaching young people — and their parents — how to better save and spend their money is a critical component to increasing college-going rates in the U.S., warned a panel of experts who spoke this week at the National Association of State Treasurers meeting in Salt Lake City.

According to panelist Margaret Clancy, director of the College Savings Initiative at Washington University’s Center for Social Development, it is not enough anymore for K – 12 students to be financially “literate.” To break the cycle of college-going rates being so directly tied to demographics, said Clancy, we must as a nation concentrate on a broader goal of financial “capability.”

Financial “capability,” in Clancy’s view, is both a step beyond financial literacy and a leap beyond simply having the wherewithal to pay for whatever bills may come one’s way.

“One cannot achieve financial capability without first having achieved financial literacy,” said Clancy. “But financial capability also means having access to safe financial products that are accessible, affordable and easy to use. This access constitutes a certain financial inclusion that allows a young person, and their parents, to be confident that they can achieve their life dreams, without going broke in the process.”

Clancy’s call for financial capability offered a ray of hope in an otherwise disquieting session that focused on the many barriers to college attainment in the U.S., and the very low high school graduation rate that squeezes the college pipeline before it reaches the end of 12th grade.

Striking in the clarity of his remarks on the challenges in the K – 12 system was panelist Dan Domenech, executive director of the American Association of School Administrators, the single largest group of individuals who run public schools and school systems across the country.

“If financial literacy is a necessary step on the path to financial capability,” then we have a real problem,” said Domenech, a former superintendent himself with more than three decades of experience in K – 12 education. “While most teachers are familiar with the term ‘financial literacy,’ their own personal knowledge of it is not well-defined, nor do they rate themselves highly on either the topic itself or their ability to teach it.”

A third panelist, Angela Baier, chief marketing officer of Colorado-based College Invest, added that more than three-fourths of parents in the Rocky Mountain State acknowledge that they are their children’s primary source of personal finance education.

However, Baier said, Colorado parents also note that they feel “less prepared to give their teens advice about investing than they do about sex.”

(Full disclosure: I was the fourth panelist at this event, and I feel ill-prepared to talk to my teens about either investing or sex.)

What is the level of “financial capability” in your family? What is your view on how this problem can be addressed by all the stakeholders in higher education, including parents?

In previous columns on college costs, I have taken both schools and federal politicians to task for their role in causing the college sticker-price problem or, at minimum, standing idly by while the problem worsens.

And, in future columns, I will revisit the role of these “characters” in the escalating college-cost story, while also introducing the critical component of shrinking state budget support as a contributing factor in the double-digit tuition increases around the country.

But today is a time to look in the mirror and to be honest with ourselves regarding the role that we parents play in the rise of college costs.

Much as the other players in the rising tuition game, we have sometimes been in the midst of the action, and sometimes on the sideline.  On occasion, we have done things to exacerbate the problem, while at other times our inactivity deserves its share of the blame.

What do I mean?  Here are a couple of examples.

In the actions that certainly haven’t helped category, we as a group decided, back in the  early 1990s, to give birth to the largest post-war generation of babies in U.S. history, larger even than the baby boom of which so many of us were a part.

The sound of this baby-boom echo still reverberates and, due in no small part to our urging, an increasing percentage of those newly minted grads chose to continue their education at a two- or four-year college.

As I’ve noted in previous columns, this increased “college demand” alone is a principal reason why college already costs so much and why the cost has and will continue to go up.

Yet, when I say we must look ourselves in the mirror when it comes to college costs, it is not enough just to cite our individual child-bearing decisions from years ago.

It is fair to assess, however, whether our child-rearing decisions in the wake of those record number of births have, in their own way, contributed to the college-cost problem.

For instance, a large percentage of us have shown a willingness to pay a premium for what we consider to be brand-name and/or high-quality services for our children, whether it be the money we spend for music lessons, sports travel teams, academic tutors or any one of the myriad of products and services that cater to how special we believe that our children are, and how much we want to support them in whatever endeavor they choose.

Colleges notice this behavior, and it is a contributing factor to how they price their “service,” which is providing a higher education to our children.  Many colleges also see our willingness to provide our young adults with cars on their campuses, accoutrements for their dorm rooms and cell phones or other electronic devices on their persons, and they surely must think to themselves, “Oh, they won’t mind a few more bucks per credit hour.”

You and I know that we do mind when costs go up, and that we deserve at minimum an explanation and at most some tangible relief.  Some schools explain their costs better than others; we need to demand that all schools place higher priority on better communication with us, and better budget transparency in general.

And whatever our financial circumstances, we need to take a close look at the “wants” and “needs” of the current and future college students in our families, distinguish for ourselves and for them the difference between those two impulses, and help guide these still-impressionable young adults to smart, specific buying decisions and even smarter, general financial literacy.

See, looking in the mirror wasn’t so hard to do after all.

I’ll be back next week with more information intended to empower you to best support your children on their paths to and through college.

College parents are struggling to meet the cost of college these days, to be sure. And federal tax policies could be a lot more family friendly, to be even surer.

Yet, on this Tax Day Eve, with filing to occur no later than midnight tomorrow, it’s probably best to focus on the tax deductions and credits that college parents currently have, rather than the ones we want.

Since tax credits are certainly preferable to deductions, I’ll start by outlining the American Opportunity and Lifetime Learning Tax Credits. But first let me note a proviso: both the deductions and the credits have phased-in income limits on the ability to take full advantage of them, and eventually a hard income ceiling where the deduction or credit disappears.

The American Opportunity Tax Credit (AOTC) applies to 100% of the first $2,000 of a college student’s annual tuition and fees, plus 25% of the next $2,000. This credit can currently be claimed for up to four tax years, and is allowed when the students is carrying at least half of a full-time load.

Complementing the AOTC is the Lifetime Learning Credit (LLC), which is available for an unlimited number of years and without a requirement to carry a certain course load. This LLC equals 20% of tuition and fees up to $10,000, for a maximum annual credit of $2,000.

According to SmartMoney.com, “Qualifying expenses for both AOTC and LLC include post-secondary tuition and mandatory fees for you, your spouse and any other person claimed as a dependent on your tax return.”

Unfortunately, the conversation on tax credits is short, and there are income limits, as well as this rather unusual twist: if you are married and filing separately, you are completely ineligible for either AOTC or LLC.

On to deductions, which help you less directly on your taxes owed, but nevertheless are better than nothing. For 2009, you can deduct up to $4,000 of college tuition and fees paid for you, your spouse or any other person claimed as a dependent on your return. This is an “above-the-line” deduction, which means you don’t have to itemize in order to take advantage of the break. Again, however, there are catches, i.e. there is no eligibility if you are married and file separately from your spouse and no deduction is allowed on the tax return of any person who can be claimed as a dependent on another person’s return. And the deduction starts to go away at $65,000 for single filers and $130,000 for joint filers, and is gone completely at $80,000 for single filers and $160,000 for those who file jointly.

So these items comprise your bag of gifts on Tax Day Eve. I wish that I had more to tell you about, maybe next Tax Year.

College Parents of America president James A. Boyle joined financial aid directors from New York University, Penn State and Wesleyan, as well as representatives from Sallie Mae and FinAid.org, in a live webcast on Tuesday, April 6 from 7 – 8:30 PM EDT:

WSJ On Campus Presents – Paying For College: What You Need To Know

The webcast was co-presented by Unigo and The Wall Street Journal, and the panel discussion was moderated by Jordan Goldman, founder and CEO of Unigo.  Topics discussed included: the FAFSA, scholarships, types of federal grants and loans, negotiating for a better financial aid package, and the effects of recent student loan reform legislation. 

Yesterday, President Obama visited Northern Virginia Community College to sign the Student Aid and Fiscal Responsibility Act, shorthanded by lawmakers as “SAFRA.”

One reason the President signed the bill at a community college is to underscore that the new law includes $2 billion to improve educational and career training programs at community colleges. These 2-year schools can be a smart alternative for students and their families who are looking to save money, but attain an associate’s degree, or stay on path to a bachelor’s.

Nevertheless, four-year schools get ever more costly and the bill does nothing to directly address the high cost of college, through previously discussed methods such as price controls or penalties to schools for raising their prices above certain levels.

For instance, the bill authorizes $36 billion for the Pell Grant program, increasing the maximum award for the next academic year to $5550 and, beginning in 2013, indexing increases in Pell Grant to the cost of living. Pell Grants are the “foundation” student aid program, meaning that students must first utilize a Pell Grant before any other need-based financial aid is awarded.

According to supporters of the bill, this new money became available for Pell Grants due to savings that were made by the elimination of Federal Family Education Loan (FFEL) program and the conversion of all federal student loans to the Federal Direct Student Loan (FDSL) program, administered by the U.S. Department of Education. Supporters of the bill noted that elimination of the FFEL program and originating all new loans in the FDSL program will yield a net savings of $61 billion over the next 10 years.

One other use of this savings will be to place an additional $1.5 billion into income-based repayment for student loans. Starting in 2014, new borrowers will be able to cap their student loan payments at just 10 percent of their adjusted gross income.

Despite the passage of “SAFRA,” the fact remains that college costs continue to go up, with many selective private schools already announcing tuition increases of more than 4%, and many state schools looking at double-digit percentage increases.

College Parents of America’s mission is to help parents understand, prepare for, protect and maximize their family’s college investment. With the cost of college continuing to rise, and this dramatic action by Congress barely making a dent in the price for the average family, we are proud to be working with GradGuard (www.gradguard.com), a service of Next Generation Insurance Group, in offering the first national group policy for tuition insurance.

The purchase of tuition insurance can go a long way toward bringing families some peace of mind when it comes to the college investment. As the cost of college continues to rise, college refund policies are getting stricter. A typical situation is that a school will not refund any tuition or fees after the beginning of the 5th week of a semester. With tuition insurance from GradGuard, a member of College Parents of America can file a claim for the loss incurred should a student have to withdraw from school for a medical reason.

Learn more about standard membership in College Parents of America, which includes $5,000 in tuition insurance coverage.