Saving and Self Funding Article Header

Saving and Self-Funding

Read the first part of this series to learn more about HBU’s “A Higher Education” and return on your investments.
To learn more about taking on debt, read the second part of the series here.

Since 529 college investment plans were first implemented by states in 1996, saving for children’s college has become as normalized as saving for one’s retirement. Earnings in the 529 plans remain tax-free as long as the money is used for authorized college-related expenses. Plans include general funds for any eligible institution, as well as pre-payment at the current rate with a premium for state schools and for private schools.

Parents who open an account can contribute as little as $15 per month in Texas, and contribution limits typically exceed what parents would ever put in, said Kathy Ruby, director of College Finance at the national company College Coach.

“We emphasize the importance of saving and saving early,” Ruby said. “When I worked in college admissions, I often talked with families whose students were at the end of their junior year, and it was already too late to save in some regards. That’s part of why I now enjoy working with families earlier in the process.”

Brannon Lloyd, a college planner and founder of Houston-based The College Money Guys, agrees about saving for college, but has a different view of the standard college investment plan.

“I’m not a big fan of 529 plans,” he said. “There are a couple of flaws, and the main one is you’re completely limited by what you can do with that. I know of some families who had to withdraw the money in an emergency and had to pay penalties.”

Some students decide to take other routes upon high school graduation as well. But, even if everything goes as planned, the 529 plans can potentially disadvantage families who might otherwise qualify for more financial aid, he said.

“I hesitate to give specific advice to a general audience on how to invest because it all depends on where people are financially, and if their child is a newborn or a junior in high school,” Lloyd said. “The main thing is, we do a thorough analysis and walk hand-in-hand with parents and students through the process of preparing for college. My general advice to parents is, I don’t care if you have a newborn or a junior— one of the worst things you can do is show up for college and not have any savings. Regardless of where you are in your financial life or how old your children are, you should definitely start saving now.”

Ruby emphasizes that parents should be comforted knowing that they normally will not have to pay the entire “sticker price” of college tuition and fees. Still, saving toward children’s college is a lifetime gift to them, she said.

“It’s an investment in your child’s future,” Ruby said. “If you value education, then being prepared is important. Education provides increased earning power and intangible benefits in how graduates contribute to their communities.”

In the absence of family funding or student loans, there are still those who manage to pave their own financial road. Although, paying one’s way through college is “less feasible than it used to be,” Ruby said.

Lloyd worked his way through college as a high-rise concierge and a hardware store associate.

Around the same time, former HBU Board of Trustees Chairman and successful businessman John W. Gibson, Jr., utilized the G.I. (Government Issue) Bill to attend Auburn University after serving for three years in the U.S. Army. He and his wife, Elizabeth, supported their family while both earning their degrees.

“I never really thought about borrowing money,” he said. “I delivered newspapers to cities throughout east central Alabama at night, and fixed pinball machines, arcade video games and televisions. Then I worked in the Veterans Affairs Office and my wife worked as a youth minister.”

Gibson later earned his master’s degree from the University of Houston while working full-time. He says simply, “We made it.”

Since college costs have outpaced inflation in the decades that followed, stories of self-funding through college have become more rare, Lloyd said.

“It’s very difficult for students to cover college completely without extending their years in college,” he said. “I would recommend looking at military service or scholarships for the most help.”

Still, some modern students have pulled off the improbable. A generation after Gibson and Lloyd, Texan Mary Higby said she considered taking student loans, but quickly dismissed the idea.

“I don’t like owing people money,” she said. “I wanted to get out of college and start fresh.”

As a kinesiology major and English literature minor at the University of North Texas, Higby took a job working 12-hour shifts as a server.

“I would schedule my classes early. At work, I got really efficient with my time and would study when it was slow in the afternoons,” she said. “It was a popular place and I got good tips.”

She took on additional work over the years, sometimes working three different jobs while attending school.

Higby became a general manager and, after earning her bachelor’s, went on to earn her master’s of science in sports management while working much more than 40 hours per week.

While she graduated debt-free, Higby acknowledges her way was a sacrifice. She had to quit the women’s rugby team early on due to her arduous schedule.

“I think it was the harder route,” she said. “I never got the college life experiences like football games and sororities. But, having no loans — it’s nice, I’ll tell you that.”

Higby is now an athletic coordinator for a charter school in the Dallas area. She said that the service industry can pay off in the short term, but in the long-term, she chose a career that would allow her to have regular hours conducive to family life.

“I felt like I had to make a way to get where I wanted to be. I think some kids start college and feel like it’s a time to play. I would say that you can do that, but it’s not necessarily going to help you reach your long-term goals,” she said. “Whatever you decide to do, remember to focus on your long-term goals and not just your immediate goals.”

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