Free College and CSAs – The Perfect Pair
In the lead up to the Democratic and Republican National Conventions, we’re producing a three-part series on major themes of the 2016 election season and policy reforms that CFED believes should be at the center of the national debate. We kicked off yesterday with a focus on economic inequality and the role unfair tax programs play in holding back opportunity. Today’s post focuses on higher education access and success, and the game-changing potential of children’s savings policy. And tomorrow, Emanuel Nieves will focus on the growing racial wealth divide and strategies for expanding racial equity as we boost economic opportunity.
As the political parties gather in Philadelphia and Cleveland this month for their conventions, one of the topics that is sure to come up is higher education. The high cost of college, rising levels of student debt and the inequality in degree attainment by income and race have led policymakers and voters alike to conclude that our country is facing a higher education crisis. Some of the ideas we’ve heard for tackling this crisis are free (or debt-free) college, changes to financial aid and student loan refinancing or forgiveness. These ideas mainly focus on the issue of college affordability and ensuring that students are not saddled with unsustainable debt for the next decade — or more — of their lives.
Affordability is certainly a pressing challenge we must address, but at CFED, we have been looking at this problem from a different angle. As part of our mission to build an opportunity economy for all, we have focused on how to foster college access and completion among those least likely to earn a postsecondary degree: young people of color and those from low-income families. Many young adults may never reach the point of looking at or applying for college, because long before their senior year of high school, they have reached the conclusion — due to limited financial means — that postsecondary education is not attainable for them. Making college more affordable would help these individuals if they choose to apply, but the question is how to encourage them to see themselves as future college students in the first place? That’s where Children’s Savings Accounts (CSAs) come into play.
CSAs are long-term savings or investment accounts that help children (ages 0-18) — especially low-income children — build savings for postsecondary education. To help accounts grow, children receive incentives from third parties (e.g. city or state government or nonprofits), such as initial deposits to start accounts and matches for deposits. Family, friends and the children themselves also make contributions into these restricted accounts, which are earmarked for postsecondary education. CSAs help low-income children build tangible savings that can be used for postsecondary education, but more importantly, they help to build a “college-bound identity” in the early years.
Research indicates that low- and moderate-income children with college savings of just $500 are three times more likely to enroll in college and four times more likely to graduate. In addition, growing evidence indicates that savings may improve academic performance in elementary and secondary school, which in turn can help children be better prepared for postsecondary education. Many states and cities across the country, including Nevada, Maine, San Francisco and St. Louis, have already implemented CSA programs that start as early as kindergarten or even at birth.
While CSAs are an important tool for helping low-income young adults get to and through college, they are not a standalone solution. Rather, they complement other ideas for addressing the higher education crisis that policymakers have proposed, especially those that tackle the affordability side of the equation. For example, CSAs can work hand-in-glove with free college proposals. Young children would open a CSA, which would help build their postsecondary expectations and identity as future college students. Then, as they approach college age, knowing that they have support to pay for college will enable those expectations to become reality. Moreover, the flexibility of money in a CSA will provide students with funds to pay expenses not covered by free tuition, such as room and board, books and transportation.
So let’s keep the national conversation going about how we make college affordable, but let’s make sure that the next president and the next Congress make CSAs a part of the plan, too. To build a true opportunity economy, we need to ensure that all children know from a young age that postsecondary education is achievable and that the financial supports exist to make it happen.