By Bill Lubinger
Newhouse News Service

High school already?

Just when you've finally mastered middle-school math, the kid is off to band camp, learning to drive and seeing eye to eye with you, at least physically.

Ready or not, college is just four years away.

By now, with any luck, you have built up substantial college savings. If you are on track with your savings goal, now is the time to consider shifting about half of your stockpile into fixed-income-type investments, such as corporate bonds, U.S. Savings Bonds, bond mutual funds or certificates of deposit, said Tom Seifert, managing director of Fairport Asset Management in Cleveland.

If your college money is invested in a 529 plan, savings should be in more-conservative funds by now.

Why the shift with college three to four years away?

At this stage, said Leslie Gordley, a tax and financial planner with A.G. Edwards & Sons in St. Louis, "The focus isn't on the growth so much as the preservation."

The last thing you need at this point is for the stock market to sour, sinking your college fund with it, said Robert Sanders, a financial planner near Cleveland.

"You can't afford to lose your principal and shouldn't gamble on future stock- and bond-market returns that could evaporate at the drop of a hat, a change in administrations or war," he said.

At the same time, Seifert said, you need to review the other half of your investments periodically. If a stock reaches a good selling point, take the profit and invest the proceeds conservatively, he said, even if you don't need the money right away.

Unless you're comfortable managing a stock portfolio, your financial adviser should be guiding the game plan.

Sanders suggests budgeting for college expenses as they will occur. Put aside the money for the first year of college in a money-market fund so it can be liquidated as needed, he said.

Second-year expenses should go into some other guaranteed investment, like a CD or Treasury note that matures when the cash is needed.

"The same goes for the third and fourth years," Sanders said.

For parents who didn't or couldn't save, all is not lost — just a lot more difficult.

"Your goal is to preserve whatever you have at this point," Gordley said.

And get creative. Start researching scholarships and grants while the student is a high-school freshman or sophomore. The competition is thick. Get a head start.

You should also get an idea what your "expected family contribution" will be when your teen heads off to college. The expected contribution is a formula schools use for financial-aid decisions.

The College Board's Web site (www.collegeboard.com) has a calculator. Steady yourself. Your expected family contribution will blow you away.

Expect to cobble together college financing from various sources. Federal work-study programs allow students to work while in school to defray expenses. Look to student loans to bridge the shortfall. Review interest rates and terms on:

• Stafford loans, funded by private lenders and guaranteed by the federal government.
• Federal PLUS (Parent Loan for Undergraduate Students) loans borrowed in the parents' name (Stafford loans are in the student's name).
• Perkins loans for students, administered through the school.
• Loans for parents and students offered by private lenders. However, federally backed loans for college usually offer better rates. "Plus some of the student loans don't have to be repaid until after schooling," Gordley said.
• Home-equity loans/lines or borrowing from retirement accounts. These options are available, although most planners advise against taking on more debt or raiding retirement.

Consider a Coverdell account, which allows contributions of up to $2,000 a year.

Or invest in a 529 plan through the remainder of high school and perhaps the first few years of college, Gordley advised. Maybe pay the first few years of college with loans and out-of-pocket funds, and cover at least part of the tab in years three and four with 529 money.

Any possible way to reduce a student's post-college debt load is well worth the investment.

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