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Alex and Elizabeth Galiano of Chicago have the usual ambitions for their year-old daughter, Katherine. College, for one thing. Which is why you might be surprised to hear that, although they are college grads themselves and make a comfortable living, they aren't planning to save a dime for Katherine's college education.

Given how fast the costs of college are rising, what can the Galianos possibly be thinking? Tuition, fees, room and board averaged $10,636 at four-year public institutions during the 2003-04 school year, and $26,854 at private colleges and universities, according to the College Board. That's a 10 percent and 6 percent jump, respectively, from the year before. When Katherine enters college in 2021, four years of education is likely to cost more than $100,000 at a state school and $250,000 at a private college.

The Galianos are among a new breed of parents and grandparents questioning the common wisdom of saving for the kids' college tab. They base the decisions on concerns that saving for college could actually penalize their children's or grandchildren's chances of obtaining financial aid, which is much more widely available today, even to families who are well-off. In the case of parents, college savings could also divert money that they ought to be saving for their own retirement.

It's not back-of-the-envelope thinking. Some financial planners are advising clients specifically not to save for college, even as tax-free college-savings vehicles have recently become widely available.

"They looked at me as if I was crazy at first," financial planner Sean Sebold says of the Galianos' reaction to his suggestion. Saving for college has been a basic assumption of American financial life. "It's as if the hand of society was pushing them to make a financial decision that they were not required to think about but just do."

New research suggests that parents need to think differently about tuition bills far down the road.

"Under current tax and financial aid policies, saving for their children's college education can make parents worse off than if they never saved at all," says Susan Dynarski, a Harvard University researcher. Dynarski analyzed popular college-savings options and the impact each has on financial aid applications.

All college-savings plans can affect financial aid, she found, but saving money in a child's name is the worst possible way to go about it. Financial aid gets determined through a complex formula based on financial need, taking into account family income, certain assets and college costs. Under the formula, a much greater portion of savings placed in a child's name counts for college, compared with money saved in parents' names.

For example, money saved in a Uniform Transfer to Minors Act (UTMA) account, a typical way to save for college, can hurt a student's financial aid chances up to $1.24 for each dollar saved, Dynarski says.

She found that savings plans called 529s (which have become popular in recent years because they are tax-free, although problems of high fees with certain 529s have cropped up) and Coverdell education savings accounts offer the best deals for college saving from a combined tax and financial aid perspective. Still, depending on family income, those savings options can reduce a student's aid by 15 cents for each dollar drawn from such accounts.

"Unfortunately, everyone has to be an accountant or pay for one to figure it out," Dynarski says.

The research has caught the attention of Sebold, in Naperville , Ill. , and other financial planners because Dynarski's findings forecast an unsettling surprise for families who have saved part of what they need but who still must count on financial aid to pay the college bills.

That includes more and more people. Nearly a third of students in families with incomes between $70,000 and $100,000 received some financial aid in 2000; 62 percent in families with incomes below $70,000 got aid. As education costs rise faster than inflation, the need for student aid grows.

Sebold presented the Galianos with two harsh realities. Not only is there the problem of the reduction in financial aid for each dollar saved. More important, experts say, couples in their 30s like the Galianos need to save $2 million to $3 million during their working years to maintain their standard of living in retirement. As people live longer and as companies cut back on traditional retirement plans, experts say, the chief priority for baby boomers and other workers ought to be to save for themselves.

"You can get a loan for college but you can't get a loan for retirement," says Alex Galiano, a software salesman who has a finance degree.

But some college savings experts wonder if the new research is sending the wrong message.

"A huge financial planning mistake would be not to save for college at all, only to discover that you do not qualify for financial aid because your income is too high," says accountant Alice Orzechowski, author of 101 Tips for Maximizing College Financial Aid . "Income is the major deal breaker with financial aid."

For the Galianos, saving for retirement and not Katherine's education best suits them. Retirement requires more saving, and such assets as home equity, retirement accounts, annuities and insurance policies aren't considered in financial aid requests, although once money is withdrawn from a retirement account it can be counted as income or as a resource. Should the couple choose to pay for some of Katherine's education, they could (although they could forgo some tax benefits). Or they could let Katherine pay for college through loans and aid, then help her repay loans after graduation. Or they could give her money for a down payment on a home.

Should Katherine get a scholarship or not go to college, the money would stay in a retirement account. Money withdrawn from a 529 plan or a Coverdell would be penalized when not used for educational expenses.

For the Galianos, the strategy bridges two different ways of thinking. Alex largely paid his way through college with loans, while Elizabeth 's family covered the cost of her schooling. "In my mind, this is an excellent compromise," says Elizabeth . "We don't know what the future holds, but we'll be ready."

Christopher J. Gearon is a freelance writer in Silver Spring, Md.