College savings success stories: Family of seven

http://www.savingforcollege.com/articles/college-savings-success-stories-piercefamily

As we all know, every household is unique in their own way. As part of the Success Stories blog series, we’re sharing tips from diverse families across the U.S. on things like deciphering financial aid, available scholarships, college savings plans and other ways to help pay for college.

There are many parents out there who are intimidated by tuition sticker shock and have no idea where to start. Whether your children have graduated and are successful in their careers or you just opened a 529 account for a new grandchild, we would love to hear your advice. All stories we receive by May 15, 2014 will be entered in a drawing to win a $25 Amazon gift card.

This week, I’ll be telling my own story. Since my kids are young and have a long way to go until college, I’ll start by sharing my parents’ success:

The Pierce Family
Parents: MaryBeth and Kevin
Kids: Kathryn (B.S. ’01, M.B.A. ’07); Dan (B.S. ’03, M.B.A. ’13); Kevin (B.S. ’05); Kerry (B.S. ’06, M.A. ’14); Jack (B.S. ’10)
Location: Illinois, U.S.
Savings Strategy: Various

For my parents, saving money early wasn’t an option. With five kids, there was rarely a dollar to spare after paying for food, clothes and little league. But by the time I reached junior high, they knew the bills were coming so my mom found a job with flexible hours so that she could save the money she made and avoid paying for daycare. This was the early nineties, prior to the birth of 529 plans, so my parents started by opening a mutual fund to save for the upcoming tuition.

There was little strategy involved during the first couple years they paid for college. They basically worked as much as they could and saved anything extra that came in. As kids, we also contributed by putting away a good portion of the money we made from part-time and summer jobs. Realizing that they would soon have to pay for multiple tuition bills at once, my Dad began to chart the projected amount of annual college expenses for our family until the fifth child graduated, using an inflation rate of 15%.

Their most successful way of saving was through our state’s 529 plan – the Bright Start College Savings program of Illinois. In addition to federal tax-free growth on earnings, contributions of up to $20,000 for married couples filing jointly can be deducted from state taxes if you are a resident. Since they only had a few years to take advantage of these benefits, my Dad would deposit money from each paycheck directly into the Bright Start account. Even if he withdrew just days later to pay for college expenses, he would still receive the tax deduction.

By the time my youngest brother graduated high school, they were beginning to feel like old pros. The first four of us went to in-state public schools to keep costs down, but Jack had his heart set on the University of Iowa. My parents did some research and discovered that the University of Iowa offered scholarship awards to out-of state students that brought the tuition down to in-state levels if the student retained a B average.

We all graduated with a small amount of federal loans, but we were able to earn jobs making sufficient income to pay them back. Since today’s costs are much higher, my husband and I know that we will need to rely more on investments to pay for our three children’s college expenses.

How much more will you pay if you rely on student loans?

We opened a 529 account before our first daughter was born with a small inheritance I received from a grandparent. With our large family our kids receive more than enough toys and clothes during the holidays so we also ask for contributions in lieu of gifts. As I read through your success stories, I hope to discover more ways to plan for my own family’s future and ways to combat the costs of college.