WASHINGTON — If you have a child in college or heading to an institution of higher learning in the fall, I hope you have already submitted or are working on the Free Application for Federal Financial Aid.

This form — FAFSA — is necessary to get federal aid. And the sooner you submit it, ahead of other parental procrastinators, the more likely your kid will be first in line to receive whatever scholarships or grants schools have to offer. The free money goes fast.

This is also the time to find out as much as you can about the various ways to save for school. One of the best ways is to invest in a 529 plan, in which money grows tax-free and withdrawals used for qualifying education expenses are not taxed. To learn more about these type of plans, I recommend "The Best Way to Save for College: A Complete Guide to 529 Plans" by Joseph Hurley.

As part of the selection for the Color of Money Book Club, Hurley was my guest recently for an online discussion. Following are the answers to some of the questions we didn't have time for:

Q. When applying for need-based financial aid, I know that institutions look at both parental and child resources. Do you know whether a 529 savings account would count against a family? It seems like a disincentive. The families who don't save will ultimately get more (free) need-based aid, as they have no savings and are needier.

Before I get to Hurley's answer, I should explain that when you apply for federal financial aid, whether it comes in the form of loans, work study, scholarships or grants, the government expects every family to contribute to the cost of their child's education if they can.

This Expected Family Contribution takes into account a family's assets and income, and the financial aid office uses it to determine a student's financial need.

Because of the EFC, many parents often ask if it's better that they don't save. They theorize that by saving they will be expected to use that money to help pay for their child's education.

That, they believe, makes them suckers, because their kids won't get as much financial aid while the children of people who are spendthrifts make out like bandits.

That's a wacky theory.

"Families who splurge and don't save for college usually end up in a crisis situation," Hurley says. "The expected family contribution can be affected more by what you earn than by what you have saved. The assessment rate on your income is as high as 47 percent, while the assessment rate on your investments tops out at only 5.64 percent. Parents making good incomes, and spending it all, will not necessarily qualify for need-based aid and they won't have the savings needed to pay college costs."

Minus certain allowances, 50 percent of a student's income and 35 percent of assets in his or her name are expected to be used to pay for college. (The asset allocation will go down to 20 percent beginning in July.) A 529 plan is considered a parental asset in the determination of federal financial aid.

Q. Can 529s only be used for post-high school education, or can they also be used for elementary and high school tuition at private schools? Also, can 529s be used for education overseas? I mean, if the student attends college in another country, not a semester "study abroad" program.

Money saved and invested in a 529 plan can only be used for post-secondary education expenses. "The institution must be an eligible institution where students can qualify for federal student aid programs," Hurley says. "Many foreign schools are eligible institutions."

Finally, a couple wanted to know if they could set up a 529 plan for a child they expect to have: "2007 will be a good year for us financially and we hope to have a child soon. It would be nice to set away some of our earnings for our child's college."

"You can establish a 529 savings account naming yourself as beneficiary," according to Hurley. "When your child is born, you can change the beneficiary designation."

Now that's forward thinking.