As a CPA and certified financial planner, Daniel Ross makes a living helping clients plan for life’s milestones. But this fall, he and his wife, Anne, sent their daughter off to college with a surprise they never expected.

“My younger daughter got into a private university, and I was totally unprepared for that,” Ross says of Caitlin’s acceptance to Baylor University in Waco, Texas. “That one caught me off-guard because I had budgeted for California State schools. I’m very proud of her, but financially, I did not prepare for this.”

Ross expected to pony up about $15,000 per year for a state school. Now, he’s looking at more than $50,000 annually for his daughter to attend Baylor. This includes living expenses, such as flying her home for Christmas.

For the 2011-2012 academic year, it cost an estimated $23,253 to attend a California State University, $30,336 for a University of California school or $56,301 for an in-state private school, according to Creative Marbles Consultancy, a Sacramento-based education adviser. But don’t let the numbers fool you. Private schools like the University of the Pacific will sign a contract with students guaranteeing them the opportunity to graduate after four years of study. A UC or CSU school looks cheaper at first glance, but it could take years to complete academic requirements with overcrowded classrooms and fewer offerings.

According to Sallie Mae, only 60 percent of parents have saved for their children’s college education, and these parents will average an estimated $48,400 in savings by the time their children turn 18.

Ross set up college funds for his two daughters when they were babies. He and his wife contributed everything from their own income to birthday money from Grandpa. At that time, investment vehicles such as the 529 and Coverdell education savings accounts didn’t exist. The best option, Ross says, was to place the money in a Uniform Gift to Minors Account.

Earnings and gains in these accounts, now called a Uniform Transfer to Minors Account, are taxed to the child. Unearned income over $1,900 for some children through age 23 is taxed at the parents’ rate. These accounts have no maximum investment or income restrictions, but they are irrevocable. Also, the money doesn’t have to pay for school as mandated by some investment vehicles. It just has to be used to benefit the child.

“I was pretty comfortable that the girls were going to college,” Ross says. “I could exercise enough control that I could keep them from buying a Corvette, so I opted just to leave that plan going.”

Many advisers also introduce clients to 529 plans, which allow money to grow tax-free for college. The plans have perks and drawbacks when it comes to flexibility. If the child decides to skip college, the person who set up the account, such as a parent or grandparent, can switch the beneficiary to another grandchild or sibling. The caveat, however, is the money must be used for school. If you run out of qualified education expenses, the remaining distributions are taxed at your effective rate plus a 10 percent penalty on your federal return. California adds its own tax plus an additional 2.5 percent penalty.

One way to avoid overfunding a 529 account is to also include an individual retirement account in your portfolio, says Debbie Grose, a certified financial planner with Lighthouse Financial Planning in Folsom. Early IRA distributions can be excluded from income if they pay for required college expenses, such as tuition, fees, books, supplies and equipment. If money isn’t used for school, it keeps accumulating for retirement. However, IRA accounts have income restrictions. In 2012, a married couple can’t contribute to a Roth IRA if their modified adjusted gross income hits $183,000.

About a quarter of all parents who save money for college use a retirement account, 529 plan or both, according to lender Sallie Mae. Another option to grow money tax-free is a Coverdell Education Savings Account, but only 7 percent of parents who save for college use this option. The maximum contribution in 2012 is $2,000, which won’t make a dent in rising tuition bills. Further, it’s completely phased out at a modified adjusted gross income of $110,000 if filing single, or $220,000 if filing jointly. The accounts are under constant political scrutiny because they can also be used for private K-12 schools.

For the 2011-2012 academic year, it cost an estimated $23,253 to attend a California State University, $30,336 for a University of California school or $56,301 for an in-state private school.

— Creative Marbles Consultancy

And then, there’s free money. Many scholarships in the Sacramento area go unclaimed every year because students don’t apply. Jill Yoshikawa, partner at Creative Marbles, suggests students start with their high schools, some of which are developing volunteer or parent-staffed offices that focus on college and career planning. Other schools, such as C.K. McClatchy High School, have established centers open during school hours. In order to take advantage of scholarship opportunities, the student has to be assertive, says Art Baird, CEO of Creative Marbles.

“All schools get scholarship offers,” he says. “Not all of them are organized, but someone gets their hands on these offers and pushes this mail through the mail system of the school. Tragically, for many, you have a student assistant who throws this mail where he/she thinks it’s the best fit, which typically ends up in a counselor’s box, which typically ends up in a stack on a desk that he/she never looks at. So you’ve got to be a little assertive.”

But finding the scholarship is just one step. It’s the student who has to fill out the applications and write the essays. A common mistake for students is thinking they have to generate brand-new ideas with every essay, Yoshikawa says.

“Many seniors have already gone through the application process, and they usually have their college admissions essays they can amend,” she says.

As a senior at Vista del Lago High School in Folsom, Ross’ daughter Caitlin applied for about a dozen scholarships, but none of them came through. Her parents say she lost motivation for scholarship essays after applying to a half-dozen universities and finally choosing Baylor.

Now Ross is looking at loans to keep his daughter in college, and he’s not alone. Loans to parents are up 75 percent since 2005, according to a February report from the National Association of Consumer Bankruptcy Attorneys. They’re saddled with an average of $34,000 in debt to pay for their children’s education.

“Now, we’re having to scramble,” Ross says. “And we’ll be able to do it, but I’m going to have to borrow some money to make it happen.”