If you have to pay for college yourself instead of with government aid, how will you do it? That question is bothering a lot of students and parents today who cannot see where the money will come from.

Some of it can come right out of the U.S. Treasury, in the form of legal tax avoidance. As you might expect, the richer you are, the easier and more lucrative it is to avoid income taxes.

The simplest move is to put a college savings account into the child's name. If you save money in your own account, the interest will be taxed in your bracket. But if you save it through your child's account, it will be very lightly taxed.

The first $1,000 of interest earned on your child's savings account will pass income-tax free; after that, his tax bracket starts at 12 percent. The difference between your bracket and your child's bracket represents money rescued from the Internal Revenue Service.

The account, incidentally, must be directly in the child's name--not in your name "in trust for" the child. An "in trust for" account is taxed to you, not to your child. The child's money can be invested in bank certificates, in a money fund or in any other way you think it will be safe.

Another idea is to lend money to your child, interest free. The child invests the money in something safe such as a bank certificate or a money fund, where it will accumulate at a high rate of interest. Again, that interest will be untaxed or only lightly taxed.

The younger the child when the money is lent, the longer the interest will be left to compound. Eventually, the child uses his accumulated interest income to pay for college. When he gets his degree, he repays all or part of the seed capital you lent him.

Interest-free loans are a tax trap for people who don't have them drawn correctly or who don't understand all their implications. IRS believes that you have made a gift to the child on the interest that you failed to charge.

A taxpayer named Lester Crown fought the IRS on this issue and won in the Seventh Circuit Court of Appeals, but the IRS is still taking taxpayers to court in other states.

The gift-tax question will not affect most people. You can give each child $10,000 every year entirely free of federal gift taxes, and $20,000 if the gift is made jointly with your spouse. An individual would have to lend more than $66,000, foregoing interest at 15 percent, before he or she runs into federal tax questions (although there may be state gift taxes on amounts of $3,000). So all but the largest "Crown loans" should not attract the attention of the tax collector.

But there are other problems, if the loan isn't drawn up correctly by a lawyer or accountant who's knowledgeable. You must lend your child the money on a demand note, which can be called at any time.

If the note has a term such as "payable in five years," the present value of the uncharged interest over the note's entire term may be treated as a taxable gift in the current year. That might attract the IRS. If you set an indefinable term--such as "payable when Susan finishes college"--the entire sum is treated as a gift, even in the Seventh Circuit, according to New York lawyer Edward S. Schlesinger.

Some people play games with Crown loans. They borrow, say, $20,000 from a bank and lend it to the child, interest free. Soon thereafter, they reborrow that $20,000 from the child at, say, 18 percent interest, and return the money to the bank.

On paper, they seem to be left with an 18 percent debt to the child. They pay and tax-deduct the interest; the child uses that interest for college tuition; after college, parent and child cancel each other's loans.

That's obviously too good to be true. The transactions have no economic substance. People play these games, but if they get caught by the IRS, they'll pay.

For wealthier people, trusts are the answer. A variety of trusts can be used to shift income from the parents' high bracket to the child's low one.

If you own your own business, you can shift income just by giving your child an honest job. His earnings are tax deductible to your business; the child can earn up to $3,300 a year entirely untaxed. Every dollar of tax savings is money out of the pocket of Uncle Sam and into the pocket of the college bursar.