Annibale, Widrow: How a small rule change made Texas 529 college savings plans more inclusive


Austin American Statesman
By: Bob Annibale, Woody Widrow
April 23, 2014

Research has shown that college savings accounts are critically important to promoting higher college enrollment. A child whose family has saved $500 or more toward college is about seven times more likely to attend college than a child with no savings account. Over the long term, a college degree has a dramatic impact on a person's earning capacity. A Texas community college graduate earns, on average, $240,000 more than a high school graduate over a lifetime; a four-year college graduate earns $790,000 more.

Yet many low- and moderate-income Texans lack easy access to college savings accounts, and they struggle with finding free and independent financial advice. Although 529 programs have no eligibility requirements based on income, research indicates that only 5.4 percent of 529 account holders in Texas earn less than $50,000. Nationally, the median income for families with 529 accounts is $142,000, about three times higher than those without the plans.
Now thanks to a little-heralded rule change by the Texas State Securities Board in February, low-income Texans will be able to take advantage of assistance from nonprofit financial coaches and counselors to better navigate savings plans applications, including the tax-advantaged 529 plans sponsored by the state.

The rule change is important to bolster Texas' growing efforts to promote greater college enrollment among low- and moderate-income populations. Enrolling in the Texas Tuition Promise Fund, one of the state tax-advantaged 529 programs, enables low-income families to take full advantage of the Texas Save and Match Program, administered by the Texas Match the Promise Foundation.

For a group of low-income single-parent families who participated in the innovative pilot program that led to the rule change, the implications are especially important.

More than 100 single-parent families took part in the Child Support for College Program, an 18-month pilot program where custodial parents were encouraged to deposit child support payments into 529 Texas college savings plans. Until the regulation was rewritten, nonprofit financial coaches involved in the program were prohibited from advising the families on the state's 529 programs because most of them were not registered financial planners in Texas. RAISE Texas, a statewide asset-building coalition, worked with the Texas State Securities Board to address this anomaly.

While college savings accounts may not be the panacea for ensuring that all Texas high school graduates have the funds to complete college, they do help families to begin the financial process, along with the educational preparations and expectations, for completing further education. Thanks to the families that participated in the pilot program, low-income parents in Texas have a better shot of saving to send their kids to college. Easier access to 529 accounts and more readily available financial coaching advice are invaluable tools for funding their educational goals. They also are major stepping stones in ensuring the state's college savings efforts are both accessible and inclusive.

Annibale is global director of community development and microfinance for Citi. Widrow is executive director of RAISE Texas.

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