Start early on college fund aid more likely to be partial than comprehensive


Even though your infant isn't walking yet, you're probably dreaming of the day he'll march down the

aisle in cap and gown at his college graduation.

Unfortunately, that dream might remain a fantasy if you don't plan for your offspring's campus years.

The College Board estimates that today's education and personal expenses already average $15,300 a year at private schools and almost $7,000 at public institutions.

And parents of future college students can expect the bill to be much higher. Tuition increases at American universities have averaged nearly twice the rate of inflation during the past decade, and many economists predict the cost will skyrocket even further.

Mighty price tags notwithstanding, prudent parents still can find ways to foot the bill -- or at least a healthy portion of it.

Here are some tips and trends:

* Start early. Even if you can only put away a small amount each month, financial planners say it's well worth the effort to start a long-term college-savings plan early.

Although there's really no magic age, financial authors Lew and Karen Altfest recommend in their book, "Lew Altfest Answers Almost All Your Questions About Money" (McGraw-Hill), that a systematic savings program should begin at least eight years before the first child goes off to college.

The sooner you begin, the less impact savings will have on your yearly cash flow, say the Altfests. And the interest on your savings will further help with the bill.

* Invest wisely. You'll find there are many options suited for a college fund -- so many that you might want to hire a competent financial planner to help set realistic goals, plan a portfolio and chart a timetable.

One rule of thumb to keep in mind: The older the child, the more caution one should exercise.

One popular strategy has parents with young children putting their money into mutual funds that invest in a diversified portfolio of stocks and bonds. Because you can get started with as little as $500 to $1,000, mutual funds can be affordable for young families and are less risky than purchasing individual stocks.

When college draws near, a healthy nest egg should be in place. Parents, then, gradually can begin to withdraw money from the mutual funds and transfer it into safer investments such as certificates of deposit, short-term Treasury notes or money-market accounts so funds will be available when the freshman year arrives.

Another popular savings option for the college years lies in zero-coupon bonds. Although they have a fixed yield, all generated income is received at the time they mature. The idea is to have such bonds fall due about the time you need the money for schooling.

Series EE savings bonds, meanwhile, often are good investments for middle-income families.

With these bonds, taxes that are normally deferred until amounts are withdrawn are eliminated entirely for those whose income falls below a certain level and who use the proceeds for payment of tuition, fees and books. These bonds must be purchased in the parents' names.

Yet another option lies in plans that allow families to lock in current costs by prepaying the college bill. The best of such plans, say the Altfests, are those that offer students who are of college age and who already have been accepted by a school the opportunity to prepay all four years when they enroll.

* Learn the ABCs of financial aid. Financial aid of the 1990s is designed to fill in the gaps, not cover the entire tab. But by using grants, loans and scholarships, students can finance a significant share of their college education.

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