Your nipper starts college in two years and your 529 is 100% in stocks, so it has enchanted a big hit. You don’t know if you should move out of stocks now to avoid further losses.

You should arrange started moving out of stocks a few years ago. When your child is within a year or two of freshman year, you no longer bear time on your side. You are going to have to start using that ready money sooner rather than later, so you need to make sure your coins is safe and sound in the 529 plan’s bond or money market pelf. My recommendation is that you slowly shift money out of stocks and into bonds starting at age 14. If your contemporaneous allocation exceeds those targets, I recommend you rebalance your portfolio ASAP. I want I could tell you to wait for a nice big rebound in your portfolio, but you do not from time on your side. There is no guarantee that the rebound resolution come between now and when you have to begin writing the checks for college. Those of you who be undergoing opted for a fund in your 529 plan that automatically changes its allocation as your boy gets closer to college still need to pay attention and understand how much you wishes have invested in stocks when your child hits 14, 15, 16, 17, and 18. I procure seen plans with up to 50 % in stocks a year or two before the young man will enter school. That’s unacceptable at any time, and it is especially touch-and-go in 2009, when we have to anticipate more market volatility. If you spot your target fund overloads on stocks close to college, I push moving out of the target option, finding the best low-cost stock and constraints fund options offered by the plan, and putting your money in both those funds according to the policy above.

You have time on your side, but after watching your toddler’s college fund plummet; you just can’t stomach keeping the entire portfolio invested in stocks.

It’s excellent to move up to 20 % into bonds. A small amount of bonds last wishes as reduce your portfolio’s overall loss in a bear market, and if that helps you slow committed to investing and helps you sleep better, then it is the right make a move for you.

Distributions from 529 to pay student loans

You tried to move small change out of your 529 plan’s stock fund and into the bond reserve option, but you were told you had to wait until next year.

See that an IRS rule requires 529 plans to limit participants to rebalancing their portfolio honourable once a year. The reasoning is that you can’t be trusted to be a patient long-session investor, so this rule was meant to keep you from day-trading your kid’s college pelf. As if. So if you have already rebalanced your portfolio for 2009, you may have to attend to until 2010 to make your switch out of stocks. Because of this direction, it is imperative to get your asset allocation right so you don’t need to make any midyear corrections. As I clear up above, once your child is 14 you need to start dialing down how much of your college reservoir is invested in stocks.

Your family doesn’t qualify for financial aid (or the aid wrap isn’t as much as you expected), but you don’t have money to pay the college bills this year.

Chief, you need to take a deep breath. I know it is stressful. I know it is upsetting. But you do org options. One of the great misconceptions is that federal loans are only for students and families that gather certain income-eligibility rules. That is absolutely incorrect. In ell to the many forms of aid and loans that are income based, there are also affordable loans within reach for students and parents regardless of family wealth or income. If you find that your Lyceum’s financial aid package for 2009 – 2010 is not enough to cover all your costs, you can appendage that aid with non-income-based loans. The first step is for your young gentleman, the student, to apply for both subsidized and unsubsidized Stafford loans. Yes, your youth borrows first, not you. Stafford’s are the cheapest loan options. If you want to mould a side agreement with your child that you will succour with the repayment of the Stafford’s, that’s fine. But please get over any apply to or guilt about having your child borrow first. If you congregate income-eligibility rules, your child may qualify for a subsidized Stafford advance. (It is typically part of a financial aid package you receive from the school.) Subsidized means the federal regime pays the interest on the loan while your kid is in school. The interest scale for a subsidized loan is 6 % for the 2008 – 009 school year and 5.6 % for the 2009 – 2010 institute year. But here’s what so many people fail to understand: Anyone, regardless of proceeds, can apply for an unsubsidized Stafford. The interest rate is fixed at 6.8 % and behalf payments are the responsibility of the student. The student can opt to not pay interest while in school and be undergoing it added to the loan balance. Here’s a suggestion: If Grandma and Grandpa fall short of to know how they can help with school, ask them to cover the Stafford note payments so their grandchild can graduate with a lower loan weight. If that’s not an option, your child can work during school and create the interest payments him – or herself.

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