This little piggy
went to college…..Andrea Levere
WASHINGTON — WHEN her
son, Cole, came home from his first day of kindergarten at a public school in
San Francisco two years ago, Lauren Sigurdson, a single mom who struggles to
pay basic expenses, found a welcome surprise tucked in his backpack: a flier announcing
that Cole would be getting his own savings account, with an initial $50
deposit.
The account was for
Cole’s college education. Donors would match whatever deposits she (or anyone
else) made. Since the account officially opened in January 2013, Ms. Sigurdson
has saved $20 almost every month. Cole’s account is now worth $785.34.
Cole is one of more than
13,000 children in San Francisco who have benefited since 2010 from the
Kindergarten to College program, which provides every public school student
entering kindergarten with a Children’s Savings Account containing either the
$50 deposit or, if the child is enrolled in the National School Lunch Program,
$100.
Nationwide, C.S.A.
programs are still small. They currently have the potential to serve a little
more than 200,000 students, instead of the millions who could benefit. C.S.A.s
are hardly the only solution to the college affordability puzzle, but they
force families to start a conversation about planning and paying for higher
education early.
This matters. A study
published last year in Children and Youth Services Review found that children
from low-income families with as little as $500 (or even less) in an account
like this were three times more likely to attend college and four times more
likely to graduate.
There are also remarkable
ripple effects. Researchers at Washington University in St. Louis observed that
the social and emotional development of children with C.S.A.s was better than
it was for those without the accounts. Perhaps even more tellingly, their
mothers were both less depressed and more optimistic.
Because C.S.A.s make it
possible for families to lift themselves up through savings, they are a
comfortable fit for Republicans and Democrats. Different versions have been
proposed by Republican senators, including Jeff Sessions of Alabama, and by
Democrats, including Charles E. Schumer of New York.
Ron Wyden, an Oregon
Democrat who is the chairman of the Senate Finance Committee, said earlier this
year that he had rarely seen an idea with such a “strong level of support from
all ends of the political spectrum.” Last month, Representative Joseph Crowley,
a Democrat from New York, introduced a proposal in the House to open a flexible
savings account for every child.
Creating a system of
college savings accounts, starting in kindergarten or as early as birth, could
be accomplished with relatively little cost, primarily through long-overdue
changes in higher-education tax spending.
Congress should start by
eliminating the $600 million deduction for college tuition and fees, which is
essentially a Pell Grant for the wealthy. The 20 percent with the highest
incomes receive more than 90 percent of the support from the program, while the
bottom 60 percent, on average, get nothing.
Yes, eliminating a
handout for high-income households would cause political problems, but the
hundreds of millions of dollars wasted annually on this deduction should be
used instead to provide a starter savings account for the four million babies
born in America each year.
The money could be rolled
into tax-preferred college savings accounts, which are used almost exclusively
by wealthier families. How exclusively? The savings of the bottom half of
earners make up 1.1 percent of all the savings in these accounts.
Reforming the American
Opportunity Tax Credit, which also covers college tuition and fees (as well as
books) could also help boost college savings. The majority of the $16.6 billion
spent in 2013 on this credit went to upper-income households who could afford
to pay college expenses up front and then file for reimbursement at tax time.
Why not allow low- and
moderate-income families with C.S.A.s to receive the credit ahead of time? This
would increase college savings while making the credit accessible to those who
can’t afford to front the full cost of tuition months before tax time. This
reform would be politically frictionless because it would have no effect on
households who currently benefit from the credit.
Promising C.S.A. models,
which typically include a financial education component, also exist at the
state and local levels. Kindergarten to College uses city government money for
administration and seed deposits, while philanthropic, corporate and individual
donors provide matching incentives through vehicles like the 1:1 Fund, an
online tool created by my organization that lets donors make direct
contributions to C.S.A.s. To give another example, the money for Nevada’s
College Kick-Start Program, which provides $50 in a college savings plan to
35,000 kindergartners, is generated through grants, private sponsorships and
program management fees.
Not everyone goes to
college, of course, but C.S.A.s can be used for any postsecondary education,
including trade school. They are a simple, cost-effective solution for families
who assume a college education is only for those higher up the economic ladder.
Andrea Levere is the
president of the Corporation
for Enterprise Development.
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