Oppenheimer bond fund losses hit college 529 savings plans

— -- Thousands of parents of college-age children who thought their college savings were sheltered in low-risk portfolios watched their accounts shrink last year after a bond fund offered by at least four state 529 plans lost more than a third of its value.

The Texas College Savings Plan's blended age-based portfolio for children 18 years and older has 50% of its assets in the fund. The portfolio fell 21% in 2008.

Kevin Deiters, director of educational opportunities for the state comptroller's office, says state officials are disappointed in the fund's performance but haven't made any decisions about whether to replace it.

Other examples:

•ScholarsEdge, a 529 plan offered by New Mexico, has 25% of its age-based portfolio for children 18 and older invested in the fund, according to the plan prospectus. That portfolio dropped 17% last year.

•Maine's NextGen College Investing Plan offers a balanced fund portfolio that has 40% of its assets in the fund. Through Nov. 28, the most recent information available, the portfolio was down more than 42%.

•Oregon's College Savings Plan has 20% of its ultra-conservative portfolio — aimed at parents of children who are in college — in the Core Bond fund. That portfolio fell 9% last year.

In August, Cameron Hyde, an architect in Portland, moved about $40,000 to the in-college portfolio to cover expenses for his son, Owen, a freshman at Lane Community College in Eugene. He's lost more than $4,000.

Hyde thought the portfolio was extremely safe. "It's like retiring," he says. "When you need the money, you need to take the risk out of it."