Boomers struggling to put their kids through college are finding the challenge even tougher this year, say financial advisors.

Many parents have to pay thousands more for tuition and other expenses in 2005 due to a change in the complicated formula the U.S. Department of Education uses to calculate financial aid.

A recent analysis by the New York Times found middle-class families would have to pay more than $1,700 extra for each college student in 2005, compared to 2001, after adjusting for inflation, under the new formula.

Many middle-income clients rely on college aid. For instance, among students with family incomes from $45,000 to $74,999, 71% to 93% receive financial aid, according to the National Center for Education Statistics, Washington.

Most federal aid such as Pell Grants and Stafford Loans, as well as a good deal of state and institutional assistance, weigh educational costs against the student’s and family’s ability to pay.

Where the Department of Education’s aid formula has changed is in its calculation of state and local taxes, using data from the Internal Revenue Service. Due to moderation of inflation, those taxes have increased less than expected. So, according to the department, it’s easier for families to pay for college out of their own assets.

For instance, under tables the department used from 1993 to 2004, Montana and Nebraska residents paid an average state tax rate of 7%. Under the tables it uses for 2005 and 2006, the department calculates those same residents are paying a rate of 4%.

Nationwide, the Government Accountability Office calculates the updated state tax allowances will increase expected family contributions to a child’s college costs by $440 on average, for those with an increase.

GAO expects about 35% of students receiving Pell Grants will see their grant reduced and it estimates 81,000 recipients will no longer be eligible for the grants at all.

Robert Kuehl, a financial advisor with H.C. Denison Co., Sheboygan, Wis., generally counsels clients to save as much as they can for college, because even in the best of times, financial aid is always a “very tricky deal.”

Kuehl generally advises parents to put those savings aside in their own name. “This gives them full flexibility to gift that investment to the kids later, when they go to college. That gets the tax benefits.”

Kuehl notes, however, many mid-income parents can’t put away a lot of money for college because they have other financial goals, particularly retirement.

“You can’t take a loan for retirement like a kid can for college,” Kuehl points out.

Robert Cusick, a financial advisor at Investment Insights Ltd., Cortlandt Manor, N.Y., agrees that many families can’t fully fund both retirement plans and college costs.

For many, the answer is to take loans and hope the parents will be in a position later to help the child pay them off.

Cusick also encourages hard-pressed clients to bargain hunt for a good school that doesn’t carry a recognized brand name.

Once example: Ball State University, Muncie, Ind., currently charges about $22,000 a year in tuition and board, vs. $40,000 for nearby Notre Dame.

He also advises parents to get an early start on aid, telling them to get hold of the Free Application for Student Financial Aid form in the summer between their child’s sophomore and junior year of high school.

Raymond D. Loewe, a college advisor with Financial Resources Network, Marlton, N.J., and the founder of the Web site, collegemoney.com, points out that the financial aid change involves only the federal formula. Private colleges have their own aid rules, and few have made any changes to their allowances. Many will make up for shortfalls in federal funds out of their own endowments, he says.

“I would go to the school to see if they can make up that loss,” he advises. “Many of them will.”