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Four Reasons Why Education Savings Accounts (ESAs) are Not Children’s Saving Accounts (CSAs)

As the children’s savings movement continues to grow and attract attention from policymakers in cities and states across the country, a new trend – related in name only – has also begun to gain some traction at the state level. Beginning with legislation adopted in Arizona in 2011 and continuing in four other states (Florida, Mississippi, Nevada and Tennessee), so-called education savings accounts (ESAs) have been enacted by state legislation. In 2016, as many as 18 states saw ESA legislation introduced.(1) More recently, ESAs have been included in the 2016 Republican Party Platform. Though sharing a similar designation, children’s savings accounts (CSAs) are fundamentally different from ESAs in everything from their purpose to their design to how they engage parents and children. Here is what all CSA advocates should know:

  1. ESAs are not really savings accounts. According to the Education Commission of the States, ESAs are “individual accounts funded by the state that allow parents or guardians to purchase a broader array of educational choices.”(2) In this sense, ESAs are really an extension of school choice and voucher programs in that they allow parents to direct public funds toward a range of education expenses that may include tutoring, online courses and private school tuition. ESA supporters promote the fact that parents are able to roll-over or “save” any funds not spent on primary and secondary education into a college savings account or toward post-secondary education expenses. But saving other people’s funds (in this case public dollars) is hardly “saving” in the traditional sense. ESAs have also been termed “flexible education spending accounts,” which is a more apt way to describe their purpose and use.
  2. ESAs are not about post-secondary education. Unlike CSAs, whose proceeds are primarily designated for investing in post-secondary education, ESAs (as noted above) are really about using public dollars to pay for primary and secondary education expenses. While ESAs allow a range of eligible uses, research on Arizona’s ESA program (the first to be implemented and the program with largest number of participants) indicates that 83% of all ESA funds in 2014-2015 were used for tuition costs at private secondary schools.(3) Smaller shares were used for tutoring (7.1%) and therapy (5%).
  3. ESAs provide no incentives for parents to actively contribute to the account. A fundamental feature of all CSAs is that they offer savings incentives that encourage accountholders to save and build wealth in their accounts. ESAs offer none of these features. Rather, ESAs are a mechanism to allow parents to control public funds that are allocated for the education of their child. ESAs are funded either with a deposit (usually 80 to 100 percent of per pupil funding for a particular child) into a restricted-use account or via reimbursement to parents for education expenses at a level equal to the per pupil revenue the student would have received in public school.
  4. ESAs have few, if any, progressive features. Another important feature of many CSAs is a progressive incentive structure that provides greater incentives for low- and moderate-income savers. In this way, greater benefits are directed toward those with less means. The only feature of ESAs that might be deemed progressive is that, in each of the states that currently has a program (with the exception of Nevada), eligibility is limited to “special needs” students, defined as those who are currently enrolled in public school and are either: a) subject to an Individual Education Plan (IEP), or b) have a form of legally recognized disability. As ESAs proliferate, however, it appears that they may be moving away from this special needs focus. Nevada’s legislation, passed in 2015, provides universal access to ESAs (though the program is currently on hold pending a constitutional challenge in state Supreme Court). In Arizona, since the original legislation was passed, eligibility has expanded to include children with “unique needs,” including children of armed service personnel, wards of the state, those residing on an Indian reservation, those attending failing schools, and siblings of students already participating in the ESA program.

We encourage CSA advocates to carefully monitor legislation in their state capitols and to be prepared to clarify with policymakers, the media and the general public that ESAs are really an extension of school choice and voucher proposals and should not be confused with CSAs.


1. Inez Feltscher, “The 21st Century Education Savings Accounts: Peer Reviews, Branding and Consumer Reports as Parent Tools,” The State Factor: A Publication of the American Legislative Exchange Council, May 2016.

2. Hunter Railey, “Education Savings Accounts: Key provisions and state variations,” Education Trends, Education Commission of the States, August 2016.

3. Alexandra Hudson and Rick Esenberg, “Education Savings Accounts: A Primer for 21st Century Education Policy,” a report from the Wisconsin Institute for Law and Liberty, July 2016.

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