Q: What is a discount broker?

A:Before 1975, all brokerage firms charged the same fee, known as a "commission," to trade stocks and bonds. The Securities and Exchange Commission, the federal government agency responsible for overseeing investment firms and their services, regulated commissions.

Beginning May 1, 1975, brokerage firms were free to compete with one another on price, like companies in almost all other industries. Most of the firms in existence at that time largely continued with business as usual, charging relatively high commissions.

However, a new breed of brokerage firms, dubbed "discount brokers," was born. These firms charge substantially lower commissions, typically 50 percent to 75 percent lower, than the other firms. Today, discount brokers abound and continue to capture the lion's share of new business. Major discount brokerage firms include Charles Schwab, TD Waterhouse and Fidelity.

Discount brokers can place your trades at a substantially lower price because they have much lower overhead. Discount brokers tend not to rent the most swank downtown office space that they can find in order to impress customers. Discounters also don't waste tons of money employing economists and research analysts, who largely produce worthless forecasts and predictive reports.

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Q: In prior columns, you've advised parents to save in retirement accounts so that their children won't be penalized on financial aid when it comes time to apply to college. How will I come up with money to pay for college when my funds are in retirement accounts?

A:In most cases, even if you have some liquid cash that can be redirected to your child's college bill, you will, in all likelihood, have to borrow some money. Only the affluent can truly afford to pay for college with cash.

One good source of money is the equity in your home. You can borrow against your home at a relatively low interest rate, and the interest is generally tax-deductible. .

A plethora of financial-aid programs allow you to borrow at reasonable interest rates. In addition to loans, a number of grant programs are available through schools and the government, as well as through independent sources. You can apply for the federal government programs by completing the Free Application for Federal Student Aid. Grants available through state government programs might require a separate application.

Your child can work and save money during high school and college. In fact, if your child qualifies for financial aid, he or she generally is expected to contribute a certain amount to education costs from employment during the school year or summer breaks, and from savings. .

Address correspondence to Eric Tyson, King Features Syndicate, 888 Seventh Ave., New York, N.Y. 10019

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