(MONEY Magazine) – Q. My son will be ready for college next year and wants to go to the University of Pennsylvania, Tulane or Georgetown, all of which cost upwards of $25,000 a year, even though he could probably get a full scholarship at Penn State. With excellent grades and twin 700s on his Scholastic Aptitude Tests, he has a good chance of getting in. But how can I afford it? I am divorced, earn about $25,000 a year and have very little savings. My ex-husband, who pays $45 a month in child support, may not help us.

Allison D. Truman Colmar, Pa.

A. You could remind your son that taking a free ride at Penn State would give him enough savings to attend a distinguished graduate or professional school, which is probably more important than undergraduate school in the long run. That's the sensible approach. But I must confess I believe kids should pursue their dreams. So here are three steps to help you tap into cash and loans: First, apply for financial aid to the federal government (you can get the form from your son's high school guidance counselor). Based on your income and assets, Joseph Re of Octameron Associates, a college guide publishing company in Alexandria, Va., figures that you will probably have to raise about $1,300 a year yourself and your son another $200. But federal grants, loans and work/study programs could help make up the rest. Among the possibilities: a federal Pell Grant (as much as $2,300 a year) or a Supplemental Education Opportunity award (as much as $4,000). If he goes to college in Pennsylvania, the state-which uses the same application form as the Feds-might chip in another $2,600. Second, make sure you include a Divorced/Separated Parents form with each application (get them from the colleges). If your ex-husband signs this and has income, the school will expect him to contribute. Otherwise, you should ask a lawyer to draw up a declaration saying that your ex refuses to pay. And third, fill out any other aid forms the schools may require. A financial aid officer at each institution will then make you an offer. Since schools generally go all out to get top students like your son, don't be shy about playing one college off against another. Call the financial aid person at Penn, for example, and ask him if he can top Tulane's bid. Be assured, though, that if your son does get into those schools, there's a good chance his bills will be covered. According to Money's annual college guide, on average Penn meets 95% of a student's aid needs, Tulane 96% and Georgetown 100%.

Q. In 1993, I invested $125,000 for my widowed sister-in-law in Managers Intermediate Mortgage Fund, which was then a top-performing fund. It invested in derivatives, however, and she lost $40,000. Is there any way to recover the money?

Frank Polashock Edison, N.J.

A. Maybe. Already, several furious investors have filed lawsuits alleging that the fund and its manager, Minneapolis brokerage Piper Jaffray, violated federal securities laws. And a federal district court in Bridgeport, Conn. may combine those cases into a single class-action suit. If that happens, your sister-in-law would automatically be entitled to a share of any settlement. But can the investors win? They argue that Managers' prospectus and sales materials did not properly disclose the role that derivatives (securities tied to the performance of other investments) played in the portfolio. Those derivatives included inverse floaters that are very sensitive to interest rates; that's why the fund got clobbered when rates rose last year. Managers says it can't comment on the suit. But senior analyst Tom Hoffman told us that such losses are simply the result of market risk (what I call life in the big city). Moreover, nobody complained about Managers back in the fall of 1993, when its annual return over the prior five years averaged 13%--a point more than many similar funds. That performance is what landed it on lists published by Money, Morningstar Inc. and others. But we also warned of the hidden danger in Managers and other funds in January 1994's Fund Watch ("Risky Securities Can Turn a Pet Fund into a Killer"), alas too late for you. I guess the lesson is that you can't look just at a high-flying fund's performance, you have to look at how it earned those numbers. To keep track of the lawsuit, your sister-in-law can call Sanford Dumain, an attorney for the investors, at 212-594-5300.

Q. Last week, I received notice in the mail that the pension fund of one of my former employers--Union Carbide--is being transferred from a general account at Prudential Insurance to a separate Prudential account. I am not due to start collecting benefits until 2008, but does the change mean the fund was being poorly run? Is my pension money safe?

Wallace Fu Holland, Mich.

A. Fortunately, most such changes are harmless--and they all have to be reviewed by the Labor Department to make sure that pensioners don't get hurt. In this case, the story goes back to 1985 when Union Carbide's pension had accumulated so much money that the company was becoming a juicy target for corporate raiders. To safeguard the cash, the company converted the plan to a Prudential annuity for its employees. (Since then, the law has been revised to protect pension funds during a takeover.) In this latest move, the money is being transferred from a general Prudential fund that could be tapped by creditors or other policyholders into a fund just for the Union Carbide plan. Ergo, your money will remain safe as long as Prudential Insurance doesn't go under--which seems unlikely, even though A.M. Best, the rating service, may lower the firm's current A+ rating later this spring because of expenses associated with settling lawsuits against Prudential Securities. But look on the bright side: Even if Prudential tanks, there is absolutely nothing that you or I can do about it. Now if that isn't enough to make you sleep at night, try hot cocoa and Xanax.

Q. I recently ordered a burglar alarm from ADT Security Systems, but when I read the fine print in the contract, it stopped me cold. Paragraph 5 says that I authorize ADT to order telephone equipment and change my long-distance carrier without informing me. Paragraph 7 says that I absolve ADT from liability if it is negligent or violates consumer protection laws. Should I really sign this?

Richard Perry Rockville, Md.

A. You know I have a bleeding heart for the consumer, but in this case, the giant corporation is not out to munch your vitals. Paul Strapp, attorney for ADT, says the company will not switch you from Candice Bergen (Sprint) to Dick Cavett (AT&T) or rip you from your beloved MCI calling circle. Paragraph 5 simply allows ADT to install a telephone jack to connect your alarm to its offices so that the company will know--and can alert the police--if you have a break-in. Paragraph 7 is also standard for the industry. Essentially, it ensures that if a burglar does manage to get past the alarm, your insurer--not ADT--will have to pay for any lost goods. So sign the contract, once you're sure your homeowners policy is adequate to cover possible losses.

Q. In the past two years, three of my relatives have died of natural causes. At the funerals, several people urged me to buy a cemetery plot to spare my survivors the cost of burying me. But being 34 and in good health, I would rather let my life insurance pay the bill after I die. That way there'd be less money for my wife's future husband, right?

Ricardo Carvajal Sugarland, Texas

A. Given your age, I don't think you should invest in a plot. By the time you die decades from now, you may be living in a distant city, and your relatives will not relish the expense and hassle of burying you in some far-flung locale. But do make sure your wife has good insurance: The average U.S. funeral runs $4,000 and a burial plot costs another $150 to $2,000. To cut the high cost of dying, you might consider cremation, which costs as little as $500. Or join one of the 150 burial societies across the nation, nonprofit groups that arrange burial for about half the going rate. You can find one near you by calling or writing the Funeral & Memorial Societies of America (6900 Lost Lake Rd., Egg Harbor, Wis. 54209; 414-868-3136). As for your wife, I'm sure that, like me, she won't husband-hunt right away--at least not until the body has chilled.

Money also answers your financial questions on Cable News Network's Your Money Saturdays at 3:30 p.m. and Sundays at 9:30 a.m. eastern time. Send your question, plus your name, address and phone number, to Money Helps, Time & Life Building, Rockefeller Center, New York, N.Y. 10020.

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