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North Dakota Launches Statewide College Savings Program
By Ethan Geiling on 06/29/2011 @ 10:45 AM
On May 18, North Dakota launched a new program to help families save for college. The Children First program, which is being administered by the Bank of North Dakota, will provide a $100 grant in a 529 college savings plan for any newborn born on January 1, 2011 or later. To qualify, the state grant must be matched by a private source by the child's fourth birthday. The bank has set aside $1 million for the 2011 grants. North Dakota has nearly 9,000 babies born each year. The Children First program builds on other savings incentives in North Dakota’s College SAVE plan.
The Bank of North Dakota is the only state-owned bank in the country.
A 529 savings plan is a state-sponsored, tax-preferred savings plan for college. Every state has at least one 529 plan, and many states offer multiple plans. Although 529 savings plans are mostly used by higher income families, they can be an important asset building tool for low- and moderate-income families as well. Recognizing this opportunity, 12 states have created financial incentives for families who save in the plan. For example, Arkansas’s 529 plan offers a 2:1 match on contributions to families with an income below $30,000, and a 1:1 match for families with an income between $30,000 and $60,000 a year, up to $500 a year. So for every $1 a low-income family saves for their child’s education, the state adds $2 on top of that, both encouraging and catalyzing the savings.
North Dakota isn’t the only state that has recently created a new program incentivizing savings for families. In 2010, Nevada created the Silver State Matching Grant program, which provides a 1:1 match on contributions for families with income below $41,400 a year, and a 50% match for families with income between $41,301 and $61,950, up to $300 a year.
Within the past few years, three states – Illinois, Kentucky, and Oklahoma – have established task forces or legislative study commissions to explore incentives for college savings as an incremental step toward establishing matched 529 policies.
Incenting savings through 529 plans is a sometimes overlooked asset building policy strategy. However, 529 plans can be a powerful tool to reach a large number of low-income families. States should build on the momentum of North Dakota, Nevada, and others by creating their own matching programs for their states’ 529 programs.
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