by Gwen Moritz
Posted 6/2/2014 12:00 am
Updated 6 months ago
529 College Savings Day was last Thursday — 5-29, get it? — and the Arkansas Department of Higher Education invited me to speak to a group of women bloggers in hopes that they would help get the word out.
Why me? Not because I’m editor of Arkansas Business, although that’s probably why the folks at ADHE noticed some of my tweets on the subject. I was invited because the Moritzes — my husband, our two sons and I — could be the poster family for 529 college saving success.
I hesitated to dedicate this space to this topic because I know that Arkansas Business readers tend to be much wealthier than the Moritz family and may never have to worry about how they will pay for their children’s educations. But this is a subject that is near to my heart, and I hope you may find some value in this column even if the cost of college isn’t one of the most terrifying challenges you face. Believe me, for your employees, for many of your relatives, for people you go to church with and the people who teach your children, it is.
Shortly after our firstborn arrived in the fall of 1990 — a year before I took a job as a business reporter even though I knew nothing about business — I read an article that sent an electric shock through my newly maternal brain. It said, simply and indisputably, that every dollar I saved for my child’s college education would earn money and every dollar I had to borrow for college would cost money.
I couldn’t get that out of my mind, so before our son’s first birthday, we started buying Series EE U.S. Savings Bonds, which have a modest tax advantage when used for education. My husband bought them through payroll deduction — $25 per paycheck, twice a month. And, friends, it wasn’t easy. Two young journalists weren’t making much money, and housing was more expensive in Nashville, Tennessee, where we had relocated when we realized the Arkansas Gazette was going to take both our jobs down with it.
But we kept it up. Month after month. Our second son arrived in 1994, and I set out to double that monthly college fund contribution. When we no longer had the expense of diapers, I redirected those dollars to college savings. My mother started giving the boys bonds for birthdays and Christmas.
In 1998, Tennessee introduced a state-sponsored 529 plan whose units were guaranteed to increase in value at the same pace as tuition at Tennessee state colleges. We cashed out most of the Series EE bonds we had saved during the previous seven years — a thrilling $10,000! — and bought Tennessee 529 units.
We kept buying the Tennessee units, month after month, even after we moved back to Arkansas in 1999. But the guaranteed return truly was too good to be true. The front-end fees kept going up until it didn’t make sense to keep buying. We kept the units we had already bought, and we opened Arkansas Gift Plan accounts for our boys in 2005. When we no longer had the expense of after-school care, we redirected some of those dollars into college savings.
Ultimately, we were putting $300 a month into the Gift Plan. It’s not a huge amount, especially compared with the cost of college, but it certainly could have been spent on nicer cars or a bigger mortgage or more restaurant meals.
In the fall of 2009, the older boy went to the University of Arkansas on a Chancellor’s Scholarship, and when he was a sophomore the Arkansas Scholarship Lottery began paying $5,000 a year toward his education. That was more than we had ever saved in a single year (and, as it happened, an amount that would have to be reduced for future recipients). The balance of his education was practically free.
We looked at the totals in our 529 accounts and realized that we had more than enough to send the younger boy through the engineering & IT program at UALR, on which he had set his heart when he was 14. After almost 21 years, six months before the younger boy got his high school diploma in 2012, we stopped saving for college because we had saved enough. It didn’t seem possible — and perhaps it wouldn’t have been had the stars not aligned so well: overly generous returns from the state of Tennessee, an overly generous lottery scholarship, a generous academic scholarship and children who freely chose relatively affordable state universities. Even if those things hadn’t all lined up, our boys would have far, far less debt than had we not made the effort.
This is the story I was invited to tell to the bloggers last week. The moral is this: Mere mortals can amass significant college savings if they put their minds to it and start early. The Gift Plan, Arkansas’ 529 plan, is an excellent vehicle for parents (and grandparents) who want to make it happen.
Email Gwen Moritz, editor of Arkansas Business, at GMoritz@ABPG.com.