One Good Idea: A College Savings Account for Every Child

A study finds that students who had saved between $1 and $500 were four times more likely to graduate than students with no savings at all.

This can only be used with Sophie Quinton's piiece which originally ran in the 7/19/2014 issue of National Journal magazine. Child's bank account for college.
National Journal
Sophie Quinton
See more stories about...
Sophie Quinton
July 18, 2014, 1 a.m.

In Feb­ru­ary, Nevada star­ted open­ing a col­lege sav­ings ac­count for every child en­rolled in pub­lic kinder­garten. In March, a private Maine found­a­tion an­nounced it would de­pos­it $500 in­to a 529 ac­count — that is, a col­lege sav­ings plan — for every baby born in the state. And some time dur­ing the next school year, Col­or­ado plans to open col­lege sav­ings ac­counts for about 2,000 low-in­come preschool­ers.

(James Kacz­man)States, cit­ies, and counties hope that start­ing sav­ings ac­counts for kids will en­cour­age par­ents to plan for their chil­dren’s post­sec­ond­ary edu­ca­tion. The amount fam­il­ies save may not mat­ter, says Reg­gie Bicha, ex­ec­ut­ive dir­ect­or of the Col­or­ado De­part­ment of Hu­man Ser­vices (which is part­ner­ing with two oth­er state agen­cies on the pi­lot pro­gram). “What mat­ters is that they learn early about the im­port­ance of sav­ing — that they see col­lege as a real­ity in their chil­dren’s fu­ture.”

In­deed, re­search sug­gests that even small nest eggs can in­crease the odds that a child will earn a de­gree. A 2013 Uni­versity of Kan­sas ana­lys­is of the Pan­el Study of In­come Dy­nam­ics, a long-run­ning sur­vey, found that low- and middle-in­come stu­dents who had saved between $1 and $500 for col­lege were over three times more likely to en­roll and four times more likely to gradu­ate than stu­dents with no sav­ings.

Re­search­ers at Wash­ing­ton Uni­versity in St. Louis are con­duct­ing a ran­dom­ized con­trolled tri­al to test the ef­fect of giv­ing new­borns 529 ac­counts. Thirty months after the ex­per­i­ment began, 16 per­cent of fam­il­ies that re­ceived $1,000 in a state-owned ac­count had opened up 529 ac­counts of their own, and about 8 per­cent had star­ted to save in them.

Those per­cent­ages may sound small, but in most states only about 3 to 4 per­cent of chil­dren un­der 18 have a 529 ac­count in their name, says Mi­chael Sher­raden, dir­ect­or of the Cen­ter for So­cial De­vel­op­ment at Wash­ing­ton Uni­versity. Fam­il­ies giv­en a state-owned ac­count were more likely to open (and use) an ac­count of their own. In gen­er­al, wealth­i­er and more-edu­cated par­ents were more likely to be­gin and use ac­counts, but the re­search­ers also found that re­ceiv­ing a state ac­count in­spired some less-well-off fam­il­ies to open ac­counts. Chil­dren who re­ceived ac­counts in the study showed bet­ter so­cial and emo­tion­al de­vel­op­ment by age 4 than those who didn’t, and their moth­ers were less likely to de­vel­op symp­toms of de­pres­sion.

“What mat­ters is that they learn early about the im­port­ance of sav­ing — that they see col­lege as a real­ity in their chil­dren’s fu­ture.”

Reg­gie Bicha, ex­ec­ut­ive dir­ect­or of the Col­or­ado De­part­ment of Hu­man Ser­vices

The idea that the gov­ern­ment should es­tab­lish sav­ings ac­counts for all chil­dren has been cir­cu­lat­ing since the 1990s. In 2005, a bi­par­tis­an group of sen­at­ors pro­posed cre­at­ing sav­ings ac­counts for every new­born, but the idea didn’t be­come law. While sup­port at the fed­er­al level has stalled, loc­al pro­grams have taken off — in San Fran­cisco; in Cuyahoga County, Ohio; across the KIPP charter-school net­work.

It’s still not clear how best to design these ac­counts or what level of pub­lic, private, or fam­ily con­tri­bu­tions will make the biggest dif­fer­ence. Bicha’s team has pro­posed a three-year pi­lot in Col­or­ado that — like many sim­il­ar pro­grams — would op­er­ate as a pub­lic-private part­ner­ship. The state would open 529 ac­counts for chil­dren at­tend­ing state-fun­ded preschool, and private donors would match a por­tion of fam­ily sav­ings with dona­tions. (To be eli­gible for the Col­or­ado preschool pro­gram, chil­dren must be from dis­ad­vant­aged fam­il­ies.)

Bicha hopes to prove that the link between sav­ing for col­lege and do­ing well in school will hold for very young chil­dren. He wants “to show that chil­dren who have a chil­dren’s sav­ings ac­count “¦ will be more likely to be pre­pared for kinder­garten on our kinder­garten as­sess­ment, that they’ll be more likely to read in third grade when we do our third-grade read­ing scores.” Most of all, he wants more par­ents to be­lieve that their preschool­er is col­lege bound.

MOST READ
What We're Following See More »
PROCEDURES NOT FOLLOWED
Trump Not on Ballot in Minnesota
1 days ago
THE LATEST
MOB RULE?
Trump on Immigration: ‘I Don’t Know, You Tell Me’
1 days ago
THE LATEST

Perhaps Donald Trump can take a plebiscite to solve this whole messy immigration thing. At a Fox News town hall with Sean Hannity last night, Trump essentially admitted he's "stumped," turning to the audience and asking: “Can we go through a process or do you think they have to get out? Tell me, I mean, I don’t know, you tell me.”

Source:
BIG CHANGE FROM WHEN HE SELF-FINANCED
Trump Enriching His Businesses with Donor Money
3 days ago
WHY WE CARE

Donald Trump "nearly quintupled the monthly rent his presidential campaign pays for its headquarters at Trump Tower to $169,758 in July, when he was raising funds from donors, compared with March, when he was self-funding his campaign." A campaign spokesman "said the increased office space was needed to accommodate an anticipated increase in employees," but the campaign's paid staff has actually dipped by about 25 since March. The campaign has also paid his golf courses and restaurants about $260,000 since mid-May.

Source:
QUESTIONS OVER IMMIGRATION POLICY
Trump Cancels Rallies
3 days ago
THE LATEST

Donald Trump probably isn't taking seriously John Oliver's suggestion that he quit the race. But he has canceled or rescheduled rallies amid questions over his stance on immigration. Trump rescheduled a speech on the topic that he was set to give later this week. Plus, he's also nixed planned rallies in Oregon and Las Vegas this month.

Source:
‘STRATEGY AND MESSAGING’
Sean Hannity Is Also Advising Trump
4 days ago
THE LATEST

Donald Trump's Fox News brain trust keeps growing. After it was revealed that former Fox chief Roger Ailes is informally advising Trump on debate preparation, host Sean Hannity admitted over the weekend that he's also advising Trump on "strategy and messaging." He told the New York Times: “I’m not hiding the fact that I want Donald Trump to be the next president of the United States. I never claimed to be a journalist.”

Source:
×