By: Mark Edwards and Andrea Levere
May 7, 2013
Every 5-year-old wants a piggy bank to fill with the jangling pennies and nickels that hold the promise of dreams. But for children from low-income households, even filling a toy bank can be a challenge. That's why both Democrats and Republicans on Capitol Hill have come together to develop a plan that would help the youngest students learn the benefits of depositing their money in a real bank and saving for a future that includes college.
This week, Sens. Chris Coons (D-Del.) and Marco Rubio (R-Fla.) will reintroduce the American Dream Accounts Act, which would create college savings accounts for low-income students and monitor higher education readiness through a personal online account. The proposal applies existing Department of Education dollars to encourage the development of online platforms that partner students with colleges, schools, nonprofits and businesses, and provide them with a savings account and college readiness tools.
If passed, the Coons-Rubio bill could be an important bipartisan catalyst for new children's savings efforts nationwide, some of which are already taking shape at the state and local level. Last month, Cuyahoga County, Ohio, approved a measure that will provide all kindergarteners with $100 college savings accounts starting this fall. Similar initiatives are in the planning stages in Colorado and the Puget Sound area of Washington state. These efforts follow in the footsteps of San Francisco's pioneering Kindergarten to College program, which provides a $50 deposit in a college savings account to every child entering kindergarten. Beyond the initial deposits, these programs seek to encourage families and friends to make regular contributions.
While the deposits may seem like mere pennies given the ballooning costs of a college education, more than a decade of research shows that even small amounts of savings can have a major impact on both college aspirations and attendance. Researchers at Washington University in St. Louis, for example, have found that children with college savings accounts in their own names are six times more likely to go to college than children who do not have an account.
As Cuyahoga County Executive Ed FitzGerald put it at his program's launch, "Every child in our area will grow up knowing that college is a real and attainable goal."
The increasing interest in college savings accounts is an acknowledgment of today's reality: College is indisputably a ticket up the economic ladder, but the soaring cost makes it out of reach for more and more families. According to the Brookings Institution and the Pew Economic Mobility Project, barely one in three children from the poorest fifth of families enrolls in college, and only about one in 10 graduates. By comparison, among the wealthiest fifth of families, four in five children go to college, and more than half (53 percent) graduate.
Children's savings programs, which have the potential to offer big returns on relatively small investments, are a response with bipartisan appeal. Cuyahoga County's program, for example, is expected to reach 15,000 students at an estimated cost of $2 million to $3 million a year. Moreover, funding to "seed" and "match" the accounts can come from private and philanthropic sources. The Corporation for Enterprise Development, for instance, recently launched the 1:1 Fund, which raises private dollars for the purpose of matching college savings by lower-income kids through an online platform.
We believe all sectors have a role to play in building strong ladders of opportunity for our children and youth, and that good jobs in our 21st-century economy often require a degree or credential beyond high school. Higher education is one important piece of a comprehensive approach that ensures every young person, regardless of that person's ZIP code, has a shot at the American dream. With growing state and local interest in college savings accounts, policymakers should seek every chance to encourage their availability nationwide.
They can start by exempting education savings accounts from asset limits that could result in families losing access to much-needed federal benefits programs -- a potentially powerful disincentive to save for their children's future. They can also push for the integration of college savings accounts into existing programs, such as Head Start, and include a financial education component that helps both children and their parents understand the importance of saving for the future.
Finally, they should encourage innovative efforts like the Coons-Rubio legislation. In introducing the original bill last year, Coons posed a simple question: "How can we get more Americans to think about, save for and prepare for education after high school so that they can go to trade school, community college or four-year colleges or universities?" One answer: Give children their own savings account -- and then help them fill it with hard cash and hope for the future through personal efforts and policy support.