Center on Assets, Education, and Inclusion

The study conducts an initial examination of school data and their associations with participation and saving in the Promise Indiana Children’s Savings Account (CSA) program. Data on savings were obtained from the onset of the program through February 2016 from Promise Indiana via the Indiana CollegeChoice 529 plan manager (Ascensus College Savings) and merged with administrative data on student outcomes for the 2014- 2015 school year. The primary research questions guiding this analysis is whether or not simply having a CSA, being a saver, or the amount saved is associated with lower absenteeism and/or higher reading and math scores. Given the importance of family income to both savings behaviors and academic achievement, we looked at these questions for the sample of students overall, and, separately, for the sample of low-income students (defined as free/reduced lunch participants). In this study, there is no evidence to suggest that having a CSA, being a saver (i.e., having at least one family or champion contribution), or the amount deposited are related to children’s absences. However, among the subsample receiving free/reduced lunch, having a CSA is positively associated with both children’s reading and math scores; however, this association is not found in the aggregate sample. In contrast, amount contributed has a positive association with the aggregate sample’s math and reading scores but not with the scores of children receiving free/reduced lunch. Further, being a saver is associated with reading scores for both the aggregate and free/reduced lunch samples. While more research is needed before policy conclusions can be drawn, these findings suggest that CSA programs may complement schools’ academic objectives.

This study uses administrative records from New Mexico’s Prosperity Kids Children’s Savings Account (CSA) program and in-depth interviews with a sample of participating parents and children to examine savings outcomes and experiences for these low-income Latino families. At this point in the CSA’s evolution, 29% of Prosperity Kids accounts have seen deposits from families’ saving. As of December 2015, among families who contributed in addition to match or incentives, 54% have saved more than $100 in their account. The median total account value for these families was $345 at the end of 2015 (mean, $394). The median amount of family deposits is $123 (mean, $155), with median match deposits of $124 (mean, $139). Average monthly contributions are $12 (ranging from <$1 to $220). Average quarterly contributions were $31.

This study uses administrative records from New Mexico’s Prosperity Kids Children’s Savings Account (CSA) program and in-depth interviews with a sample of participating parents and children to examine savings outcomes and experiences for these low-income Latino families. At this point in the CSA’s evolution, 29% of Prosperity Kids accounts have seen deposits from families’ saving. As of December 2015, among families who contributed in addition to match or incentives, 54% have saved more than $100 in their account. The median total account value for these families was $345 at the end of 2015 (mean, $394). The median amount of family deposits is $123 (mean, $155), with median match deposits of $124 (mean, $139). Average monthly contributions are $12 (ranging from <$1 to $220). Average quarterly contributions were $31.

In this report AEDI presents three separate but complementary studies that analyze data from the Promise Indiana CSA Program Intervention. First, analysis of a survey conducted by Promise Indiana staff with families in the Promise Indiana target population examines attributes associated with knowledge and ownership of 529 accounts. Second, analysis of savings data collected by Ascensus College Savings on behalf of Promise Indiana considers patterns of deposits, asset accumulation, and account ownership by families who have opened CollegeChoice 529 accounts through Promise Indiana. Third, findings from interviews with a subsample of parents whose children have 529 CollegeChoice accounts opened through Promise Indiana are shared to provide some qualitative context for parental perceptions about college savings within this community-driven CSA program.

This paper chronicles the development of Children’s Savings Account (CSA) policy in the states that comprise the New England region: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. This paper does not seek to compare CSA programs within the New England states directly but does detail the origins, aims, delivery systems, incentives, financing, enrollment mechanisms, and engagement approaches employed in each state, as well as challenges encountered, potential research contributions, and opportunities for expansion and/or integration into other policy venues. As described in this overview, this policy development can be best understood not as individual efforts but a regional strategy, facilitated by the New England CSA Consortium. This regional approach may hold considerable promise for advancing children’s savings nationally. As defined here, CSAs are progressive asset investments capable of cultivating improved educational attainment and, then, catalyzing greater upward mobility, particularly for disadvantaged children. Part of New England’s CSA activity has included progress toward agreed-upon metrics for gauging the effects of CSAs on indicators important to the state actors championing them, and future years will provide important insights into the potential for this intervention to support critical educational and economic development objectives.

Research suggests that Children’s Savings Accounts (CSAs) may be capable of charting improved opportunities for children’s success through the mechanisms of account ownership and transformative asset accumulation. Fueled in large part by evidence of significant effects on children’s educational attainment and economic well-being, the CSA field has experienced rapid growth, with programs and policies proliferating around the country. The accounts that form the core intervention within these CSA initiatives are delivered through two principal delivery systems: traditional depository institutions (banks and credit unions), relied on primarily by local and community-based efforts, and state-sponsored 529 college saving plans, the vehicle of choice for most state-level CSAs. At this point in the CSA trajectory, individual programs and the field as a whole face critical questions about the best ways to build CSAs, in order to maximize their potential for potent effects while facilitating sustainable replication.

This paper, jointly produced by the Center on Assets, Education, and Inclusion (AEDI) at the University of Kansas and the Federal Reserve Bank of Boston, was informed by a roundtable on CSA delivery systems, held at the Boston Fed in December 2014. It describes the design, key features, and respective challenges of each principal delivery system. Assessed in light of the CSA field’s guiding principles for delivery system design (universal and automatic enrollment, national footprint, cultivation of a saver identity, asset-building, administrative efficiency, and adequate consumer protection), these models have distinct advantages and limitations. This paper attempts to contribute to the critical task of building the knowledge base needed to help children’s savings programs begin to weigh the pros and cons of each of these existing delivery systems.

State 529 plans are tax-preferred vehicles for post-secondary education saving, administered by states, usually through contractual agreements with private financial institutions. In large part, 529s have served to intensify the distributional advantages that already accrue to more economically-privileged households. However, a small, but growing number of states are attempting to transform their 529 programs into Children’s Savings Accounts (CSAs) programs so that they better serve children and families disadvantaged economically and educationally. However, there has been little discussion about what might differentiate a CSA program administered through a 529 from a standard state 529 program. Using the case of Promise Indiana’s 529-based CSA as an example, this paper outlines what we believe to be some of the critical elements of Children’s Savings Accounts and the ways that they may help to change the distributional consequences of our current educational and economic systems, such that they facilitate, rather than frustrate, the aspirations of disadvantaged children. The paper traces the origins and evolutions of Promise Indiana, within a discussion of components of 529-based CSAs, identifies design features that align with Identity-Based Motivation, outlines the rationale for a wealth transfer within CSAs, and shares lessons for replication. The Promise Indiana’s model may be relevant in other parts of the country, particularly as communities consider how to address imperatives related to educational attainment gaps and rising student indebtedness, as well as their implications for upward mobility and broader prosperity.

While we believe that there are significant lessons to be learned from the Canadian experience with education savings programs, as the United States moves towards more comprehensive Children’s Savings Account (CSA) policy, we begin with the perhaps obvious acknowledgement that there are some noticeable differences in the political, educational, and economic contexts of Canada and the United States. For example, in 2011, Canada ranked first in overall post-secondary education (PSE) attainment among OECD countries, with more than 50% of adults ages 25 to 64 having some PSE credentials (Kenney, 2013), while the U.S. ranks 14th, with 42% attainment (OECD, 2012). Perhaps related, economic mobility rates—the likelihood that a child born into poverty will not stay in poverty as an adult—are far higher in Canada than in the U.S. (Corak, 2010). Analysis finds that a son raised in the bottom decile in Canada has about the same chances of reaching the top half of the earnings distribution as a third-decile son in the United States; being Canadian instead of American, then, provides as much of a mobility advantage as being born into a family three times more prosperous (Corak, 2010). Although income inequality is increasing in Canada, the distribution of economic advantage is still far more equitable than in the United States (Corak, 2010). This is transmitted to the PSE arena, as well, where the income attendance gap is smaller than in the U.S. (Belley, Frenette, & Lochner, 2011). Despite these and many other differences, there are enough similarities between the Canadian Education Saving Program (CESP) and, particularly, state-sponsored 529 savings programs in the U.S. that each can still inform the other in important ways.

Harnessing Assets to Build an Economic Mobility System provides new empirical insights that help to explain what so many Americans intuitively grasp, and what U.S. policy debates so studiously ignore: Upward economic mobility and a chance at financial security are slipping beyond the grasp of many households. This report examines the drivers of mobility by distinguishing between standard of living, which is related to consumption and available income, and economic mobility and wellbeing, which require assets in addition to income and fuel multiplier effects. The former is supported by the consumption-based welfare system, including programs such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP; formerly food stamps), which is designed to help households exit poverty and consume at a level consistent with a near-poverty level. Upward mobility and wellbeing is advanced by an asset-based welfare system, largely made up of tax credits and deductions that helps more advantaged Americans accumulate assets. By highlighting the significance of assets for achieving economic mobility and true wellbeing, this analysis emphasizes the importance of building policy structures capable of helping households generate assets, not just increase income. The report proposes Economic Mobility Accounts—tax-advantaged savings accounts that help Americans of all income levels save and accrue assets across the life course—as a policy structure that may once again make upward mobility accessible to all Americans.

Harnessing Assets to Build an Economic Mobility System provides new empirical insights that help to explain what so many Americans intuitively grasp, and what U.S. policy debates so studiously ignore: Upward economic mobility and a chance at financial security are slipping beyond the grasp of many households. This report examines the drivers of mobility by distinguishing between standard of living, which is related to consumption and available income, and economic mobility and wellbeing, which require assets in addition to income and fuel multiplier effects. The former is supported by the consumption-based welfare system, including programs such as Temporary Assistance for Needy Families (TANF) and the Supplemental Nutrition Assistance Program (SNAP; formerly food stamps), which is designed to help households exit poverty and consume at a level consistent with a near-poverty level. Upward mobility and wellbeing is advanced by an asset-based welfare system, largely made up of tax credits and deductions that helps more advantaged Americans accumulate assets. By highlighting the significance of assets for achieving economic mobility and true wellbeing, this analysis emphasizes the importance of building policy structures capable of helping households generate assets, not just increase income. The report proposes Economic Mobility Accounts—tax-advantaged savings accounts that help Americans of all income levels save and accrue assets across the life course—as a policy structure that may once again make upward mobility accessible to all Americans.

In this webinar presentation, we'll be answering 3 core questions: Why Canada and why now? What are CSAs and what are they intended to achieve? What can we learn about CSA programming and policy design by looking at Canada's experience?

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Postsecondary education costs in the United States today are rising with an increasing shift from societal responsibility to individual burden, thereby driving greater student borrowing. Evidence suggests that (i) such student debt may have undesirable educational effects and potentially jeopardize household balance sheets and (ii) student loans may better support educational attainment and economic mobility if accompanied by other, non-repayable financial awards. However, given declines in need-based aid and falling state support for postsecondary costs, policymakers and parents alike have failed to produce a compelling complement to debt-dependent financial aid that is capable of improving outcomes and forestalling assumption of ever-increasing student debt for a majority of U.S. households. This article, which relies on longitudinal data from the Educational Longitudinal Study, finds parental college savings may be an important protective factor in reducing debt assumption. However, several other factors increase the likelihood students will borrow: perceiving financial aid as necessary for college attendance, expecting to borrow to finance higher education, having moderate income, and attending a for-profit college. After controlling for student and school variables, the authors find that parental college savings increase a student’s chance of accumulating lower debt (less than $2,000) compared with students lacking such savings. Policy innovations to increase parental college savings—such as children’s savings accounts—could be an important piece of the response to the student debt problem in the United States.

According to Shapiro, the American Dream “is the promise that those who work equally hard will reap roughly equal rewards” (Shapiro, 2004, p. 87); that is, the American Dream holds that this country is a meritocracy where effort and ability are the primary determinants of success. Institutions provide the economic conditions that make it possible for people to believe that their hard work and ability will determine their success or failure. This task is facilitated by Americans’ strong desire to feel as though their destiny can be controlled and that institutions will ‘echo’ their own contributions, rather than work against them.1 Primed to look for evidence of this ‘effort plus ability equals outcomes’ equation, Americans cling to this ideal, even as it recedes in reality for many. There is no evidence that Americans today are less capable or less committed than in previous generations, in the aggregate. Instead, particularly in today’s highly specialized, technology driven, global world, the upward mobility that animates the American Dream is only possible if effort and ability are combined with institutional might.

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Most people do not dream of going to college and becoming rich; that is, higher education is, for most, a path to the American Dream of middle-class financial security and upward mobility, not a perceived ticket to great riches. Generally, when people dream of being rich, they think of being a professional athlete, an actor, a singer, or entrepreneur, or winning the lottery. People may dream of getting rich, but it is not this illusion of quick fortune that animates individual actions nor characterizes the American ideal. Instead, Americans expect and work toward the opportunity to become middle-class through education, and it is this promise that underscores our vision of ourselves and our presumed ‘contract’ with the institutions that govern U.S. society. In recognition of the role that educational attainment plays in opening the door to this archetypal middle-class ideal, U.S. policy decided some time ago that children’s work would be school work. Children and their parents believe that the reward for innate intellectual ability and expended academic effort will be a chance to reach, not ease and opulence, but security and upward progress. U.S. policy affirms that education is the primary path for achieving the American Dream. Therefore, quick climbs from rags to riches are presumed to be quixotic, fleeting, and not necessarily even desirable. In contrast, the denial of a fair shot to enter and stay in the middle class through education imperils the foundation on which our collective identity rests and threatens to rewrite the American narrative of ‘success’ through effort and ability, mediated through attainment of education.

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According to Dr. Thomas Shapiro, the American dream “is the promise that those who work equally hard will reap roughly equal rewards” (Shapiro, 2004, p. 87). Higher education is widely regarded as a vehicle for sustaining this dream. This belief in the potential of education to act as an equalizer is supported by research, which consistently shows that a person who attains a four-year college degree earns more than a person who does not attain a four-year degree. Indeed, there is considerable evidence that educational achievement is the primary way that Americans born in poverty may leave it. Stories of those who escape poverty through education serve to support a reassuring narrative: providing access to higher education is all that is needed to keep the American dream vibrant.

There have always been holes in this vision of American success, but today more than ever, higher education’s role as a force for equity has deteriorated, such that college may serve more to perpetuate the status quo than to create ladders of opportunity. Tracing and naming the factors that contribute to the erosion of higher education’s equalizing role is an essential step in reinvigorating the American dream. Uncovering those factors begins with an honest conversation about student debt.

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By giving students and families a clear strategy for how to overcome cost barriers, college savings increase the likelihood of enrollment. The prospect of significant borrowing, on the other hand, does little to orient students towards college as a likely part of their futures.

Even small levels of savings make enrollment more likely. Specifically, 45% of low or moderate-income students with no account, 71% with more than $1 of school savings, and 72% of students with school savings of $500+ enroll in college.

On the longer-term challenge of equipping students to succeed, CSAs also show promise, largely through reinforcing a college-saver identity (expects to graduate and sees savings as a strategy for paying for college) that increases engagement and builds expectations.

Conversely, going through school without assets can compromise achievement. Spells of asset poverty prior to age 11 have a particularly negative effect on academic achievement.

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Successfully advancing CSA policy will require analyzing the political context so that proposals can take advantage of windows of opportunity, framing CSAs as congruent with prevailing values, and crafting CSAs such that they are positioned as effective solutions to important policy problems. To this end, research documenting the concerning effects of the overreliance of student debt as a mechanism through which to finance college, as well as the potential of asset based approaches to potentially reduce high-dollar debt and improve educational outcomes, is perhaps one of the most significant developments towards national CSA policy. CSAs can be clearly understood to have potential to solve one of our most pressing problems: how to bring college affordability to enough prepared students to increase educational attainment without compromising future economic security—for the nation or for individual students. This framing of CSAs has practical fiscal implications, too; if asset-based approaches to financing higher education are seen as ways to reduce dependence on debt-heavy ones, then the ‘net cost’ might be understood to be smaller, particularly in light of the potentially negative long-term financial effects of outstanding student loans.

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CSAs should include every child of a given age—ideally, at birth, although there are certainly reasons to tie additional incentives to accomplishment of specific academic or life milestones. Including everyone in CSAs underscores the stake we all have in each other’s prosperity, which is particularly true when it comes to global competitiveness and the educational outcomes CSAs can deliver. Universality also means inclusiveness, or meaningful access to asset accumulation by low-income individuals who otherwise may not have truly equitable opportunities.1 This speaks to the need for features such as automatic enrollment (opt-out), concerted outreach and education strategies, and special incentives for lower-income households, in order to avoid a ‘universal’ CDA policy turning into another asset development investment that disproportionately benefits those already advantaged.

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The federally funded Gaining Early Awareness and Readiness for Undergraduate Program (GEAR UP) is one of the most widely known U.S. programs which attempts to increase college enrollment and completion rates among disadvantaged students. GEAR UP has three main aims specifically targeted toward disadvantaged students historically underrepresented in higher education: (1) to increase academic performance and preparation for higher education, (2) to increase the rates of high school graduation and participation in higher education, and (3) to increase students’ and families’ knowledge of higher education options, including academic preparation and financing.

In 2011, an invitational priority was announced by the Department of Education (DOE) that encouraged grant applicants to include financial access and Children’s Savings Accounts (CSAs) in their programming for students and their families. In a September press release, DOE announced 66 new GEAR UP grantees from the 2011 application cycle. Nineteen grantees were state entities and 47 were community-education partnerships.

In 2012, researchers from the Assets and Education Initiative (AEDI) at the University of Kansas launched a multi-method evaluation of 2011 GEAR UP grantees who accepted the invitational priority. AEDI combed through the GEAR UP applications and identified 33 grantees that explicitly stated in their abstracts the intention to open CSAs and/or teach financial education to students and their families. Among these 33 grantees, 25 programs completed AEDI’s initial survey. AEDI selected five programs to participate in a follow-up survey and in-depth interviews and focus groups during on-site visits. The study aimed to answer four primary research questions: (1) How well prepared do GEAR UP programs perceive themselves to be for planning and implementing CSAs? (2) What steps have GEAR UP programs taken to plan and implement CSAs? (3) What obstacles have GEAR UP programs encountered? and (4) What strategies have GEAR UP programs used to overcome obstacles that they encountered?

Student debt is understood as an investment in expanding access to higher education, but there is some evidence that debt may work at cross-purposes by impairing or, at least, failing to support, educational outcomes.

For some students, the prospect of high-dollar student debt may discourage enrollment.

Low-income students who are loan-averse may actually decide not to enroll in college at all in order to avoid debt.

Debt over a certain amount (about $10,000) may depress graduation rates and harm post-college financial security, especially for those in the bottom 75% of the income distribution.

As the student debt threshold level increases so too does the dropout level, particularly for poor and minority students.

Higher student loan debt in the first year of college may be associated with lower probabilities of graduating from college among low-income and black students.

Studies suggest that a $1,000 increase in student debt is associated with a 3% increase in students dropping out of college.

Student debt is an ineffective tool with which to tackle the U.S.’ greatest educational challenge: helping students prepare to succeed academically in college. Unlike college savings programs, the prospect of costly student debt does not motivate students to prepare for college.

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Part of the explanation for rising inequity in educational attainment between disadvantaged children and their wealthier peers may be found in the different access to capital development—human and financial—afforded to these groups of children, within U.S. policy structures. Where wealthy children benefit from their families’ ability to make college a likely part of their future, low-income children are more likely to perceive increasing college costs as insurmountable burdens. Where wealthy families receive considerable tax benefits from participating in state 529 college savings plans, low-income families participating in means-tested public assistance face strict penalties if they save money. These inequities are manifest, then, in lower college enrollment and graduation rates for disadvantaged children, and we collectively pay the price in lost productivity and a constrained ability to compete in the global economy.

To the extent to which evidence suggests that assets can alter these educational trajectories, CSA policy may be considered an investment in our shared future. CSAs would provide an alternative to current consumption-based welfare supports for low-income households and may help to close the gaps by using the lever of U.S. policy commitment to provide disadvantaged children with access to transformative asset development.

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