ST. PAUL, Minn. – Parents who think their college savings are safe in bond funds are about to have a rude awakening.

Bonds are losing money – a lot of money. Since mid-June, 10-year U.S. Treasury bonds have lost about 10 percent of their value and defied the assumption that government bonds are always safe.

It’s the type of drop that novice investors assume is only possible in stocks. But investors periodically lose money in bonds too, especially in times like the present, when the economy appears to be recovering and investors are expecting interest rates to rise.

During such times, unsuspecting investors can get hurt if they need to tap their savings while bonds are sinking. The pain is usually greatest in the safest government and U.S. Treasury bond funds, including those in 529 college savings plans offered by states.

The rout in bonds likely will subject some families to a double whammy: Many were overexposed to stocks in college funds before stocks crashed during the last three years. After enduring sharp losses they moved depleted college savings to bonds just in time to take another loss there.

If a child is about to go to college, families could end up agonizing over how to make tuition payments that have been rising about 9.4 percent a year. The total cost of sending a child to many state universities is currently about $55,000 for four years, and $150,000 for private colleges isn’t unusual.

Minneapolis financial planner Michael Hellfrich started worrying about families saving for college when he noticed that a client’s $156,000 investment in a typically safe intermediate-term government bond fund dipped to $153,000 in just four weeks.

Families with children close to their college years can’t afford such losses. Hellfrich assumes that the declines in bond prices aren’t yet over. So he is taking advantage of a provision in 529 plans that will let investors make one investment change each year in a child’s portfolio.

He is scouring every client’s 529 college savings plan to make sure money isn’t exposed to intermediate bond funds – or funds that often pick bonds that mature in about five years. Instead, he wants the bond portion of college savings plans to be in short-term bond funds. These are funds that will be safer as bond prices fall because the funds tend to pick bonds that mature in less than three years.

When investing in bonds or bond funds, investors take on greater risks with bonds that mature far into the future. The reason is that the longer the time until maturity, the more chance that the economy and interest rates will do something unforeseen.

When the economy is strong and interest rates rise, investors don’t want to hold onto old bonds that pay little interest. So the prices on those old bonds fall – as they are doing now. Bond funds, which contain a lot of bonds that mature in five or 10 years, will fall harder than the funds that just hold bonds maturing in three years or sooner. Even less vulnerable are ultra-short bond funds that select bonds that mature within about a year.

Picking bonds and bond funds can be as tricky as picking stocks, so it’s no wonder that many parents have left the job of handling their college savings up to the professionals who manage 529 plans.

But in the current environment, simply trusting a 529 plan to keep college savings safe can be a mistake.

Often, 529 plans have age-based parameters that move students’ college money automatically away from stocks and heavily into bonds the closer students gets to their college years. So, it wouldn’t be at all surprising for a 17-year-old’s 529 plan to be invested 80 percent to 90 percent in bond funds and money market accounts.

Historically, that has been a conservative move. But this year, with bonds falling, it could be dangerous if the 529 college plan is using the wrong kind of bond funds – intermediate, rather than short-term, bond funds.

Although corporate bonds generally are considered riskier than U.S. government bonds, the opposite may be true now. Treasury bonds are falling harder than corporate bonds partly because there was a mania to buy U.S. government-backed bonds. Investors were worried about the ability of companies to survive during the economic downturn.

As investors see less need to seek safety in government bonds, they are dumping them – causing the sharp price decline.

Steve Weydert, a Chicago financial planner, suggests temporarily investing the majority of a college fund in a short-term corporate bond fund. For students a year away from starting college, he’d put all savings into a money market fund because such funds generally don’t lose principal.

Another relatively safe choice available in some college savings programs would be a “stable value fund,” which guarantees a low interest rate, financial planner Timothy Brown said.