Putting College Back Within Reach
By Jeremie Greer on 05/02/2013 @ 10:00 AM
Access to a quality college education has proven to be essential to climbing the economic ladder out of poverty and into the middle class. Unfortunately, runaway tuition and out-of-control student debt have made college an unattainable aspiration for far too many. In a report released earlier this month, the College Board recommends linking two extremely powerful tools for enhancing access to a college education for millions of low income young people: Pell Grants and Children’s Savings Accounts (CSAs).
For more than 30 years, Pell Grants have made the dream of a college education a reality for millions of low-income young people. As a former Pell Grant recipient, I can personally attest to the power of the Pell grant, which made my own college education possible and positioned me to serve in the capacity I do today. However, rapid growth in the uptake of Pell Grants has caused some to question the fiscal sustainability of this powerfully important program.
So, how can Pell be saved? In its report, “Rethinking Pell Grants,” the College Board recommends the creation of “education accounts” aimed at narrowing the financial and information gaps between low-income youth and young people that grow up under more privileged circumstances.
Here is how the recommendation of the College Board would work:
- The federal government would supplement a student’s future Pell Grant by opening an education account for 11- or 12-year-old children who would be eligible for Pell Grants if they were entering college.
- The federal government would then make annual deposits equal to 5-10% of the Pell Grant they would receive if they were enrolled in college. These funds would accrue interest until the child is 17 and ready to expend the funds for college.
- The funds could only be used to pay college expenses.
- Children and parents would receive annual notification of the amount of funds available in their accounts.
The College Board estimates that, if the deposits were equal to 10% of the current average Pell Grant value, at current Pell Grant enrollment levels, the cost of the program would be about $3.7 billion per year. Furthermore, the government would only spend the funds at the point of withdrawal, not when they were credited to the accounts.
As CFED President Andrea Levere often says, “parents will do for their children what they will not do for themselves.” This simple truth has guided CFED’s belief that CSAs are elemental to the economic security and mobility of households, and by extension our country’s economic success. We believe, and research finds, that CSAs can increase college access for low-income individuals and families. Research by Washington University in St. Louis has found that children with college savings accounts in their own names are six times more likely to go to college than children without accounts.
The possibilities evident in these findings have made policymakers at all levels of government take notice. San Francisco’s Kindergarten to College program is pioneering a bold and burgeoning state and local effort to make CSAs widely accessible to all children. More recently, Cuyahoga County, Ohio, announced an effort to open CSAs seeded with $100 for all kindergarteners starting the fall of 2013, while similar initiatives are in planning stages in Colorado and Washington State. Further, Senators Christopher Coons and Marco Rubio have introduced the American Dreams Account Act, which uses existing Department of Education funds to create CSAs for low-income students and to monitor higher education readiness through a personal online savings account.
Bringing together these powerful instruments—Pell Grants and CSAs—has the potential to be a game-changer in the field of college access, and CFED looks forward to working with the College Board to advance these policy recommendations.
Education is One Way to Narrow the Racial Wealth Gap
By Carl Rist on 03/22/2013 @ 10:00 AM
EDITOR'S NOTE: This post originally appeared on the 1:1 Fund's blog and can be read here.
For generations of Americans, graduating from college has been the surest route to achieving the American Dream. Indeed, in his acceptance speech at the Democratic National Convention last September in Charlotte, North Carolina, President Obama noted, “Education was the gateway to opportunity for me.” Yet, the price tag for attending college continues to rise. With tuition and fees for resident students at public four-year colleges and universities rising at an annual rate of 5.6% (from 2001-2011), one has to wonder what this financial barrier means for the future of economic and social opportunity in the United States.
A new report from Brandeis University’s Institute on Assets and Social Policy sheds some light on this question, and the emerging answer is a growing wealth gap, especially along racial lines, resulting from unequal education opportunity. In their report, The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide, the Brandeis researchers find a growing wealth gap between white and African-American families. The main driver of this wealth gap is homeownership, but the Brandeis researchers also identify educational inequality as another key factor, and a major cause of this is paying for college. For example, financial considerations such as rising college costs, the need to work while in school rather than attend full-time, and the concern about taking on high levels of debt result in more African-American students (compared to whites) dropping out of college without a degree. Ultimately, the Brandeis researchers estimate that educational inequality is the fourth most important driver of the racial wealth gap, behind only homeownership, household income and unemployment.
So what’s the solution? Certainly, controlling college costs and ensuring that need-based aid keeps up with inflation are strategies that we, as a nation, must pursue. But there are also things that students, families and communities can do. Since we know that students with a savings account are much more likely to attend and finish college, we need to encourage all families to start saving money early for their children’s higher education. That strategy will have a positive impact on individual families’ financial health, their children’s job prospects and economic opportunities, and the overall health and prosperity of our country. As a nation, though, we’re not great savers, and for students from low-income families, who often are students of color and who will be affected most by the financial hardships of college, the challenge is even greater.
Here at the 1:1 Fund, we believe in the importance of saving for college and want to bring this opportunity to all children, especially students of color and those from lower-income backgrounds. In San Francisco, our partners at Kindergarten to College (K2C) work with every kindergartner in the San Francisco Unified School District, whose students are 41% Asian American, 23% Latino, 11% white, 10% African American, 1% Native American, and 14% other or declined to state. Of all SFUSD students, 26.5% speak English as a second language. In Mississippi, 100% of our student savers are African American and low-income. While the rising cost of college and the limits of need-based aid must be solved at the federal and state levels, individual families and their communities can help offset the financial burden of higher education by saving early and often – the 1:1 Fund exists to help them do just that. Please consider donating to the cause, and matching students’ savings, at www.1to1fund.org.
College Board’s 2013 CollegeKeys Compact Innovation Award Presented to FUEL
By Jimmy Crowell on 02/21/2013 @ 11:00 AM
Last month, at the College Board’s New England Regional Forum, the CollegeKeys Compact Innovation Award was presented to Families United in Educational Leadership (FUEL). FUEL, a Boston-based nonprofit that motivates and assists low-income families trying to access higher education, won the award for demonstrating innovation and success in increasing the number of low-income students entering and completing college. Along with this recognition, the organization will receive $5,000 from the College Board to support their programs.
FUEL, which offers programs that help students save for college, identify local scholarships and prepare for academic success, was also recognized by the College Board for their impact and potential to be replicated and brought to scale. The award is given to high schools, colleges or nonprofit organizations across the country that can demonstrate their efficacy in combating the financial and social barriers that often limit the amount of low to moderate income students that attain college degrees.
“Guided by the College Board’s principles of excellence and equity in education, the Advocacy & Policy Center works to ensure that students from all backgrounds have the opportunity to succeed in college and beyond,” said Christen Pollock, Vice President, College Board Advocacy & Policy Center. “The winning programs embody the mission we seek to fulfill, and we are proud to support them as we work towards a common goal.”
CFED’s President, Andrea Levere, has also been an advocate for FUEL’s expansion and development by serving on their Advisory Board. CFED applauds FUEL for their award and for their dedication to bringing incentivized college savings accounts to low-income students.
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The Academic BCS
By Sean Luechtefeld on 12/11/2012 @ 04:30 PM
Today, New America Foundation’s 2012 Academic BCS standings were released. Let me start out by saying that these rankings are far preferable to the actual BCS rankings.
Certainly, I understand that this is a fun way to get people thinking about college success and about the race gap that exists in education. For these purposes, I think New America’s Higher Ed Watch deserves applause. Yet, I think that the Academic BCS rankings call into a question an important point about how we measure college success.
Now, in the interest of full disclosure, I am a proud Florida State grad and was a bit disappointed that my Seminoles came in last place. But, rest assured, that pride doesn’t implicate my bias on this topic; I also worked for three summers at Northwestern and my sister did her undergraduate work at NIU. As a native Illinoisan, I’m actually quite pleased to see the Huskies and the Wildcats at the top of this list.
Nevertheless, the teacher in me takes issue with the methodology here, because it places a lot of emphasis on whether the graduation rate among football players is higher than the graduation rate among the student body more generally. While increased graduation rates is the goal, too often, student-athletes are successful in part thanks to help from programs that, although effective, aren’t accessible to the entire student body.
Rather than focusing on college success for football players, then, the conversation needs to be broadened to focus on primary predictors of college success for all students. One such predictor is whether or not a student – well before they even apply to college – has a savings account for college in their name. Research finds that those students with college savings accounts from a young age are six times more likely to finish a college degree when compared with their non-account-holding counterparts. The benefit: not only can we overcome the race gap in higher education, but we can also begin to address what Jennifer Brooks calls the “aspiration gap.”
Programs that seed accounts for families with young children for the purposes of higher education are gaining steam across the country. Just last month, Cuyahoga County, Ohio announced that it is starting a universal college savings program. Likewise, the State of Colorado is in the process of piloting a program that would create Children’s Savings Accounts for all TANF recipients. Initiatives like these are essential if we are to get serious about the changing nature (read: increase cost) of higher education.
While my Seminole pride makes me wish FSU performed a bit better, I think New America’s Academic BCS rankings are an important starting point to discuss means by which we can improve college access and success, and I applaud their efforts to mainstream this conversation.
Cuyahoga County Will Offer Universal College Savings Accounts to All Kindergarteners
By Kori Hattemer on 11/30/2012 @ 10:00 AM
In Ohio, Cuyahoga County today announced a new initiative to open a college savings account for every incoming kindergartener in the county, which includes Cleveland. Championed by County Executive Ed FitzGerald, the program is the largest effort to offer child savings program in the U.S. and will serve about 15,000 students in public, private, charter and parochial schools.
Cuyahoga County will start by enrolling 25% of kindergarteners in the program in fall 2013 and plans to enroll 100 percent of incoming kindergarteners by fall 2015. The county will seed each account with a $100 initial deposit that can be used for any postsecondary education, including vocational training as well as two- and four-year colleges. The program will also include a financial education component and is part of an accelerating trend to begin teaching saving and money management skills to both children and their parents.
The Cuyahoga County initiative is part of a growing national movement at the state and local level to help low-income children and families learn how to save for college and manage their finances. It follows a similar effort launched in San Francisco, now entering its third year, that provides a $50 deposit to public school kindergarteners, and a pilot program recently started in Mississippi. A number of other large-scale initiatives are also in development. The emergence of these programs reflects increasing recognition by local and state governments that even a small amount of savings can have a dramatic impact on long-term expectations, particularly for low-income children who may otherwise grow up believing college is out of reach.
Success Story: New Financial Education Workshop in Texas
By Julian Mensah, Guest Contributor on 11/16/2012 @ 03:30 PM
Literacy Instruction for Texas has been at the forefront of helping improve the literacy rate in Dallas for over fifty years. All of our adult low-level literacy classes are taught by volunteer instructors. We firmly believe that it's unacceptable that 21% of adults in the 11 county vicinity of North Texas are functionally illiterate.
We've recently begun to focus more on financial literacy by partnering with YWDallas to offer our students a financial educational workshop. We had the opportunity to attend the 2012 Assets Learning Conference and realize education and financial stability go hand in hand.
Just this week, three students were the first to graduate from the Financial Educational Workshop. We owe a big thank you to YWDallas for administering the workshop on our grounds! These three are now eligible for Individual Development Accounts (IDAs).
Assets & Opportunity Network Tells CFPB What Effective Financial Education Looks Like
By Jennifer Brooks on 11/09/2012 @ 02:00 PM
In one of its first collective actions, the Assets & Opportunity Network sent comments to the Consumer Financial Protection Bureau (CFPB) on what works and what doesn’t to build financial capability.
The comment letter, which you can read here, identifies two pressing challenges to making financial education effective. First, it argues, there is behavioral resistance; many people who need financial education the most are not open to receiving it. Second, there is no agreed-upon definition of “financial capability,” nor is there a clear and coherent means of assessing the effectiveness of financial education programs.
Addressing each of these gaps will need to be central to CFPB’s efforts to build financial capability. As the Network argues in the Letter, “if our ultimate goal is to raise the general financial capability of American households, we will need to reach beyond the households who are already receptive to new information and behavior change. Behavioral resistance to financial education must be understood, confronted and overcome. If we fail in this endeavor, households who don’t get the benefit of financial education will only fall further behind in their own financial security, while at the same time posing a ‘systemic risk’ to the nation’s overall financial health.”
CFED and the 60 Assets & Opportunity Network organizations applaud the CFPB’s efforts to bolster financial capability and invite you to read the Comment Letter and learn more about some of the challenges facing this important endeavor.
The Following Organizations Signed Onto This Letter:
- AAA Fair Credit Foundation
- AHEAD, Inc.
- Bilbrew Consulting Services, LLC
- Center for Asset Building Opportunities (CABO)
- Cambridge Economic Opportunity Committee, Inc.
- Catholic Charities of Maine
- CHANGE, Inc,
- Chautauqua Opportunities Inc.
- ClearPoint Credit Counseling Solutions
- Coalition for the Advancement of Financial Education, Montgomery, Maryland
- Coastal Enterprises, Inc.
- Community Action Board of Montgomery County, Maryland
- Community Action Partnership of Utah
- Delta Citizens Alliance
- Doorways to Dreams (D2D) Fund
- Florida Prosperity Partnership
- Glory Temple Ministries, Inc.
- Haven Neighborhood Services
- Hawaii Alliance for Community-Based Economic Development
- Innovative Changes
- KaizenRhino Solutions International
- Keiser Consulting, LLC
- Kemetic Business Consultants (KBC)
- Lower Columbia Community Action Council
- Lucy Gorham (A&O Network Steering Committee Member)
- Maryland CASH Campaign
- Midas Collaborative
- Mission Asset Fund
- Mutual Housing California
- National Community Tax Coalition
- Neighborhood Partnerships
- New York State Community Action Association
- Oklahoma Policy Institute
- Opportunity Fund
- Our Daily Bread, Inc.
- Partners for Prosperity
- Pathfinder Community Connections
- Peaceful Paths Domestic Abuse Network
- Pine Hills Community Development Corporation
- RAISE Texas
- Real$ense Prosperity Campaign
- Rural Dynamics, Inc.
- Sage Financial Solutions
- Southern Bancorp Community Partners
- Step Up Savannah
- Suncoast Community Capital
- Supports to Encourage Low-Income Families (SELF)
- Tacoma Housing Authority
- The Coalition for Debtor Education
- Treasure Island Homeless Development Initiative
- Turtle Mountain CDFI
- United Way of Greater Houston
- United Way of Northeast Florida
- United Way of the Costal Bend
- Urban Enterprise Association of Richmond
- Woodstock Institute
- Yakima County Asset Building Coalition
- YWCA Delaware
From the Woodstock Institute President: An Empty-nester’s Hopes For All Children to Have College Opportunities
By Dory Rand on 10/25/2012 @ 03:45 PM
EDITOR'S NOTE: This post originally appeared on the Woodstock Institute blog. Many thanks to Dory Rand for writing this thoughtful piece and allowing us to share it on our site.
All children deserve the opportunity to pursue their dreams of becoming a veterinarian, astronaut, teacher, or whatever they desire. Without an education, however, many of these dreams will remain unattainable, as will the economic mobility these careers provide. Knowing that there’s a plan in place and savings accumulating for college is a strong motivator for many children, but too few children have the security of a college nest egg.
My children’s experience is a testament to the power of college savings. Having an affordable, fixed-rate, long-term mortgage allowed me to also set aside money for my children’s college education. Despite ups and downs in the stock market and some losses in my kids’ college savings plans, significant savings accumulated because we started saving for their postsecondary education as soon as they were born. The savings were not sufficient to cover all of their college costs—they still need scholarships, grants, savings from summer jobs, and help from parents and grandparents—but they were large enough so that my kids never doubted that they would have the financial wherewithal to go to college.
At Woodstock, we’re working towards a future where all children could grow up with a savings account started at birth like my kids had. Research shows that children with a savings account in their name are six times more likely to attend college than children without such accounts, and that having financial and non-financial assets (such as equity in a house, vehicle or business) is positively correlated with attending and completing college. Controlling for other factors, including income, assets have a significant, positive effect both in terms of financial ability to attend college and in the aspirational impact on children and parents.
While the day that all children have savings accounts at birth is a ways off, there are steps we can take now to expand access to postsecondary education for more children. The Illinois Asset Building Group is urging that we take the following steps:
- The State Treasurer, who administers Illinois’ Bright Start 529 College Savings Plan, should provide a safe, conservative, default 529 investment plan for new applicants to simplify the process for families with little or no investment experience.
- The State Treasurer should accept Individual Taxpayer Identification Numbers (ITINs) in lieu of Social Security numbers for Bright Start account owner parents or guardians so that American children of immigrants can participate in the program. (UPDATE, 10/11: We are pleased that the Office of the State Treasurer has informed us that the Bright Start program recently started accepting ITINs in lieu of Social Security Numbers).
- The State of Illinois should create a college savings incentive program for children of noncustodial parents who owe child support arrears.
- The State of Illinois should eliminate requirements in the Temporary Assistance for Needy Families (TANF) program that disqualify applicants with more than $2,000 in assets or exempt education savings accounts from the asset limit so that parents of minor children who are in need of short-term cash assistance are not discouraged from, or penalized for, saving for their children’s postsecondary education. (Six states have already abolished TANF asset limits.)
I strongly support these policy recommendations and look forward to the day that all Illinois children can have savings accounts from birth that will help them to achieve their dreams.
Matching the Promise
By Kori Hattemer on 10/19/2012 @ 11:30 AM
According to a recent study by EARN, 87% of parents believe that attaining a college degree is an important opportunity for their children, but 53% of them are very or extremely concerned about affording college. Other research indicates that among youth who expect to attend college, those who have a college savings account are four to six times more likely to actually attend. Yet many families who want to save for their children’s education may struggle to do so, especially low- and moderate-income families who are overwhelmed by competing financial needs and who may not have access to savings mechanisms.
More and more state and local governments are paying attention to this issue. Nationally, momentum is building in the public sector to incentivize and help families save for college. States and localities around the country are developing innovative college savings initiatives like the recently-announced Texas Match the Promise Foundation®, a state-sponsored nonprofit organization created by the legislature specifically to solicit and receive matching funds designated for higher education. The Texas Match the Promise Foundation will offer matching scholarships to up to 150 low- and moderate-income Texas students to help them save for college through the Texas Tuition Promise Fund®, Texas’ prepaid tuition plan that allows families to save for their children to attend college.
The Texas Match the Promise Foundation® is currently accepting applications from Texas residents who:
- Are in grades six to nine.
- Have a family income of $75,000 or less.
- Enroll or are already enrolled in the Texas Tuition Promise Fund®.
- Contribute a minimum of $100 to their Promise Fund.
- Submit an essay about the career they are interested in and why.
Up to 150 selected students will receive a Matching Scholarship of up to $500 to match the amount the family or individual has contributed to the Tuition Fund. The top five applicants will receive a one-time $2,000 Promise Scholarship. Students can re-apply for the Matching Scholarship in the future, but may only receive the Promise Scholarship once.
Initiatives like the Texas Match the Promise Foundation are expanding economic opportunity by empowering low- and moderate-income families to save money that will help their kids gain access to higher education and achieve a college degree. State policies have the potential to broaden the impact of matched savings accounts and provide more opportunities to low- and moderate-income families to invest in their kids’ futures. Fifteen states currently incent savings for some families through matching grant programs or tax credits, as outlined in CFED’s Assets & Opportunity Scorecard.
The public sector has an important role to play in encouraging savings for higher education – and a growing number of governments are capitalizing on this opportunity. We applaud the good work done in Texas and other states, and will continue to work with other state and local governments to develop similarly innovative policies and initiatives that help kids and families save for brighter futures.
Investing in Children Early Increases Access to Education
By Carl Rist on 08/07/2012 @ 10:00 AM
A new blog posted on the U.S. News Education blog and written by Equal Justice Works highlights the relationship between Children’s Savings Accounts (CSAs) and educational outcomes. Much of the research cited by the blog’s author has been conducted by William Elliott from AEDI. In summarizing this research, the blog’s author writes, “The bottom line is that savings are positively associated with educational aspirations and achievement, keeping low-income children college-bound despite limited financial resources. Federal aid can help, but student debt is becoming more and more of a barrier. [...] We need more programs like K2C and SEED, which overcome the institutional and financial barriers that cause so many students to relinquish college dreams at an early age, so that higher education really is accessible to all. Only then can it fulfill its role as a great equalizer.”
To read more about this research, visit the Equal Justice Works post on the U.S. News Education blog.
Equal Justice Works is a nonprofit organization dedicated to mobilizing the next generation of lawyers committed to equal justice.
Will Student Loans be the Next Mortgage Crisis?
By Bob Hildreth, Guest Contributor on 07/23/2012 @ 01:30 PM
One trillion dollars in student debt is creating a crushing burden on millions of young Americans. But colleges are equally at-risk; deprived of the loans on which they’ve become dependent, they would face a severe financial crisis.
Colleges have dramatically increased their reliance on student loans, with government loans approaching the equivalent of 90 percent of total tuition and fees, according to The National Center for Education Statistics. Private student loans create additional dependency.
College administrators are adamant that student loans are not their problem, that they are merely bystanders to student loan default. After all, they have already received and spent the money; repayment, they say, is the problem of the government and private lenders.
If only a small number of students defaulted, these administrators would be right. But if millions start missing payments — and it’s already close to one million today, according to the NCES — the losses could compromise the government’s ability to lend. Then, colleges would have a serious problem. Already, student defaults have reached close to 9 percent, the same rate at which the recent mortgage meltdown began. If all student “problem” debts, including those forgiven and in forbearance, were considered, the real distressed rate on student loans would be an alarming 20-plus percent.
Contrary to economic theory, student debt grows in good times and bad. Mortgage, credit card, and car loan debt levels all fell during the 2008 financial crisis. Why didn’t student loan debt? Because colleges needed the money. Financial aid officers added more and more borrowing into their student awards to fill the gap between rising college costs and declining family income. The government aided in this process by offering loans, in efforts to increase college attendance.
A student loan reckoning is approaching, just when the financial positions of the government and many colleges are deteriorating. Post-election deficit plans will probably include sharp cuts in student aid, which has grown to almost half of the US Department of Education’s entire budget. Fewer Pell Grants will increase the need for loans, just when many states, most notably California, reduce spending on higher education.
Colleges are also suffering. Moody’s Investors Service has warned that college and university revenue growth will slow significantly in coming years, posting a negative outlook for a majority of these institutions, excepting those with large endowments.
The landscape after millions of students default on loans would be bleak. Public schools would be forced to seek more funding from states, while traditional private schools would fall back on their endowments. The richest colleges would gain market share of the brightest students. And for-profit schools, the most dependent on federal student loans, would suffer most.
California offers a sobering example. State budget cuts have ravished its prestigious higher education system, requiring students to wait years to enroll in foundational classes.. Business and other schools with independently strong endowments are attempting to break away from their harder-hit university systems. The governor is threatening to do away with entire campuses, if Californians fail to raise taxes.
Massachusetts may fare worse than California. Higher education is a mainstay of our economy, accounting for almost half a million jobs; some communities rely on a nearby college as the biggest local employer. What the petroleum price is to Houston, the price of tuition is to our state. If tuition rates suffered a sharp decline, our workforce would, as well.
To avoid a student loan crisis, colleges must find ways to close their financial gaps without relying so heavily on student loans. The government should determine whether colleges are capable of using other resources, such as endowments, to withstand lending cutbacks.
College is a critical investment, but we have made it an extremely risky one. The student loan bubble will burst once it reaches $1 trillion to $2 trillion, bringing down students and colleges with it. Let’s act now to stop another financial disaster.
Bob Hildreth is Founder of Families United in Educational Leadership, a nonprofit that helps low-income families save and plan for their children's educational futures. This op-ed originally appeared in the Boston Globe.
The Aspiration Gap
By Jennifer Brooks on 07/12/2012 @ 06:00 PM
In a recent New York Times op-ed, David Brooks explores the “Opportunity Gap” and the role it will play in the coming decades as today’s children come of age.
In addition to the “attention gap” and the “enrichment gap” that David Brooks describes, we at CFED also see an “aspiration gap.”
Data from the 2012 Assets & Opportunity Scorecard show that those in the richest income quintile are five times more likely to have college degrees than those in the poorest income quintile.
Why is this so? For starters, aspiring to go to college—and the academic preparation and financial planning that go along with that aspiration—is an integral part of the answer. Brooks writes that poorer kids have become more pessimistic and detached. Given the perception that the cost of college puts higher education out of reach, it’s not surprising that many low-income kids are a little pessimistic about their chances of making it to college.
The good news is that there’s a pretty simple way to change aspirations and college attainment: start saving now. People who have assets – such as a savings account or a home – are more likely to have higher expectations for their futures and the futures of their children.* Data from the Center for Social Development at Washington University in St. Louis show that children with a dedicated college savings account are four times more likely to attend college than those without. Among youth who already plan to go to college, those with a savings account are about seven times more likely to actually attend.**
The only remaining question, then, is how we make saving for college the norm for more low-income families, rather than the exception. The key is financial incentives. Currently, 12 states provide incentives for college saving for at least some of their residents. More states should follow their lead.
In addition, the federal government, which today devotes more than half a trillion dollars annually to encourage the wealthiest to save—and more than half of which accrues to the richest 5% of taxpayers, should provide a $500-savings match to the asset- and aspiration-poor majority.
Thirty years of research has proven that, given a reasonable opportunity, even the lowest-income people will save, go to college, start businesses, buy and keep homes, and create a prosperous future for themselves and their families.
These moveable and manageable policies would go a long way in helping to close the gaps that currently keep too many people from securing their financial futures.
* Min Zhan and Michael Sherraden, “Assets, Expectations and Educational Achievement,” Social Science Review 77 (2003): 191-211.
** William Elliot and Sandra Beverly, The Role of Savings and Wealth in Reducing ‘Wilt’ Between Expectations and College Attendance (St. Louis: Center for Social Development, 2010).
The Assets & Education Initiative
By Jimmy Crowell and Anita Drever on 07/10/2012 @ 01:00 PM
The Assets and Education Initiative (AEDI) at the University of Kansas' School of Social Welfare recently launched a website dedicated to research on assets and education. This exciting new tool will further connect practitioners, policy makers and academics with leading research and data on assets and education.
The easy-to-navigate and well-organized website includes subject bibliographies, working paper series, briefs, reports and news articles related to asset accumulation and education with a focus on low-income and minority groups. The website also contains video recordings of various presentations from the Assets and Education Research Symposium including the keynote speeches delivered by Drs. Michael Sherraden, Mark Rank and Michael Lomax.
In an effort to connect researchers in the field, AEDI also administers a listserv where research endeavors and obstacles can be shared and discussed. AEDI welcomes active involvement from the field to build website content.
CFED is very enthusiastic about the launch of this new and useful research tool. We hope that the release of AEDI’s website will increase awareness of the close relationship between asset accumulation and educational attainment and help to boost interest in the asset-building field.
CFED Launches Child Savings Accounts Program in Michigan
By Stephanie Halligan on 05/31/2012 @ 10:00 AM
CFED is pleased to announce the launch of the LINC Future Fund: Scholarship and Accounts Program in Grand Rapids, MI, on May 31, 2012 at four elementary schools in the Grand Rapids Public School District. LINC Community Revitalization Inc. is joining CFED and Huntington Bank to bring scholarships and college savings accounts to kindergarteners enrolled at Campus, Campau, Martin Luther King, Jr. and Caesar Chavez elementary schools in Grand Rapids.
The program will launch with a press conference Thursday, May 31 at 10:30am at Campus Elementary. Grand Rapids Mayor George Heartwell, Interim-Superintendent Teresa Weatherall Neal, Renee Williams of Huntington Bank, and LINC’s Co-Executive Directors Jeremy DeRoo and Darel Ross will share remarks. Three-hundred LINC Future Fund Scholarships & Accounts will be made available to current GRPS kindergartners at Martin Luther King Leadership Academy, Campus, Campau and César E. Chávez Elementary schools. Next year’s enrolling kindergartners at these schools will also receive a scholarship.
Developed in partnership with CFED and with support from the W.K. Kellogg Foundation, the Future Fund will the program will establish a scholarship fund linked to a college-savings account at Huntington Bank for each participating child. LINC will offer financial coaching and support to families through their Opportunity Center and Huntington will be providing in class educational supports, teaching children the importance of saving and offering tools to use in saving money.
“We have a model with a place to start and hope that this is just the beginning for future collaboration around our children’s education,” says Jeremy DeRoo, LINC’s Co-Director. Research shows that children with savings accounts in their own name are six times more likely to attend college than their peers. Through this pilot program, the partnership seeks to expand opportunities for low-income children and families to accumulate assets and increase children’s college-going aspirations.
Each school will host a Scholarship Party to celebrate with kindergartners and their families, the first will be held at Campus Elementary following the press conference on May 31.
The Future Fund seeks to address the gap in higher educational attainment affecting low income students in Michigan, and to incentivize the recruitment and retention of children in the Grand Rapids Public School system. The program will help children create a financial nest egg, increase economic opportunity, and transform their aspirations for their own futures, including plans for college.
University of Kansas Assets and Education Research Symposium
By Johanna Barrero on 04/17/2012 @ 12:30 PM
Last month the University of Kansas at Lawrence hosted the Assets and Education Research Symposium, which brought together researchers, key funders and practitioners in the asset building for children field.
The goal of the symposium was to present the latest research on assets and children’s educational outcomes. Sixteen researchers shared their findings and discussed the multiple factors affecting children’s educational attainment. From external ones such as family’s socio-economic status and asset level to psychological factors including parental educational expectations, children’s identity and sense of possibilities for their future. Following are a few highlights from some of the presentations.
The Effect of Assets on Educational Attainment
A couple of research papers showed a positive effect of access to savings vehicles (regular savings accounts and educational Individual Development Accounts, IDAs) on savings and educational outcomes for children and young adults. For instance, a ten year impact study of educational IDAs in Oklahoma presented by Michal Grinstein-Weiss from the University of North Carolina showed that participants in the study who received an IDA had an increase in educational attainment. This increase was more significant for males in the study, who were more likely to complete a college degree compared to other males in the study who did not receive an IDA.
Research by Vernon Loke from Eastern Washington University looked at families’ ability to accumulate assets over time as having a positive effect on educational outcomes for children. This has important implications for asset building programs and policies as it calls for the need to design strategies that help families save but also move up the economic ladder over time, while building a financial cushion that will allow them to cope with inevitable income fluctuations and interruptions.
Researcher William Elliot from the University of Kansas presented on the role of race and income in the cost burden of post-secondary education. His study looks at recent changes in financial aid policies that encourage moderate-income and minority students to take on more of the burden of their post-secondary education. While there is evidence that having college savings is an effective way of reducing a student’s burden, such savings are more common among higher income and non-minority students. An important recommendation from this study is the need to make more financial aid available to minority students at two and four year colleges. It also confirms the need to promote college savings among minority and low income students from an early age.
The Role of Parental Expectations and Identity
In addition to the effect of assets on educational attainment, several papers presented at the symposium looked at the role of parental and children educational expectations in shaping children’s perception of what is possible for their future.
Research by Youngmi Kim from Virginia Commonwealth University explored the impact of parental expectations and family savings as well as other indicators of financial stability on children’s educational attainment. The study revealed great disparity between parental educational expectations and children’s academic outcomes by race and ethnicity with White and Asian parents showing higher educational expectations for their children compared to African American, Native American and Hispanic parents. It also showed how economic security measured by indicators such as having health insurance coverage and other financial assets increased parental educational expectations for their children.
In addition to parental expectations, researcher Daphna Oyserman from the University of Michigan looked at children’s expectations and perception of the future as having an important effect on their educational outcomes. Socio- economic factors play a key role in how students view themselves and their possibilities for their future. They can shape a child’s identity and sense of belonging and the way they perceive the possibility and importance of pursuing a higher education. Based on their perception of what is possible and attainable for them, children gauge the difficulty of this pursuit and decide whether it is a worthwhile effort.
Many more interesting findings and ideas where shared during the symposium, all with important program and policy implications for the asset building field. The research papers will be published in a special issue of the Economics and Education Review. You can find more information on the Assets and Education Research Symposium here.
Expanding Economic Opportunity by Offering College Funding for Veterans
By June Olsen, Guest Contributor on 04/13/2012 @ 01:30 PM
In his paper, “Education and Economic Growth in Historical Perspective,” David Mitch paraphrases the 1776 writing of Adam Smith in Wealth of Nations: “The proportion between the annual produce of a nation and the number of people who are to consume that produce depends on ‘the skill, dexterity, and judgment with which its labour is generally applied.’” This “skill, dexterity and judgment” has been re-named “labor force quality” by recent analysts of economic productivity in the United States. Studies have found that many factors influence labor force quality in the U.S., but one of the most important factors has been the years of schooling completed by the workforce. Education leads to greater economic productivity, and opportunities today are more widespread as ever with accredited online universities becoming ever more important.
But unemployment does not. GIBill.com says: “The Bureau of Labor Statistics reports that the unemployment rate for veterans who served anytime between September 2001 and the present was 10.9 percent in April of 2011, compared to 8.5 percent for the civilian population.” Before veterans can be part of any economic growth in this country, they must have jobs. The GI Bill was signed into law in 1944 so that veterans could be reintegrated into society and become part of the workforce. The first step toward that end was to provide access to education for a group of people who, at the time, at best had high school diplomas.
A high school diploma (and not a GED) are now required for recruitment into the military, and soldiers do receive on-the-job training, some of which can later be applied to civilian work. But all this is not enough for veterans to be competitive in the job market. The website Today’s GI Bill gives veterans reasons to pursue higher education: “Today, more jobs than ever require a two- or four-year college degree. More education means more choices and career opportunities. It is estimated that, by 2014, 90 percent of the fastest-growing careers will require some higher education. Every bit of education you get after high school increases the chances you’ll earn good pay.”
But if education is going to translate into economic growth, it is not enough simply to get veterans into school. Studies conducted over decades have shown that increasing the number of years of schooling does not increase economic growth unless the level of cognitive skills among the students also increases. “In other words, it is not enough simply to spend more time in school; something has to be learned there,” says educationnext.org.
Veterans face more challenges than many groups when it comes to increasing cognitive skills. For one thing, they may not be well-prepared for college, and they may lack confidence in their academic ability. Then there are the adjustment issues, such as the PTSD of one veteran described in “From the Battlefield to the Classroom,” an article about increased veteran enrollment at Georgia State: “The sudden movement of a classmate during an exam would trigger his fight or flight response. And then there were the headaches, panic attacks and sleepless nights that made studying for exams or writing papers nearly impossible.”
Georgia State and other schools have an increasing network of resources to help veteran students with everything from finances to finding a support group, thus helping them adjust, and helping them to learn and increase those cognitive skills. And schools like Lackawanna Community College make a special effort to help veterans focus their course work to get useful degrees.
Education does increase economic productivity, and helping veterans not only go to school but learn there and find jobs will increase the economic productivity of our nation.
June Olsen recently graduated with a degree in educational psychology. She currently works as a writer on all things education and is always interested in connecting with bloggers online.
Evaluation in Action: Demonstrating Results, Measuring Impact and Informing Change in Financial Capability
By Deborah Visser and Daria Sheehan, Citi Foundation on 04/03/2012 @ 10:45 AM
EDITOR'S NOTE: To kick of financial education month, today's blog comes from Guest Contributors Deborah Visser and Daria Sheehan. Deborah is Director for Success Measures, Investments and Partnerships at NeighborWorks America, while Daria is Senior Program Officer at the Citi Foundation. Their post below describes some exciting evaluation measures, and CFED's VP for Policy & Research, Ida Rademacher, is honored to be presenting at the interim evaluation meeting today. We appreciate the work of Deborah, Daria and all of their colleagues at NeighborWorks America and the Citi Foundation for bringing the importance of financial education to the forefront of the national conversation.
The financial capability field is always looking for better, more rigorous ways to demonstrate results of financial coaching, financial education, housing, credit counseling and asset-building efforts on the lives of individuals and families. To address this need, the Citi Foundation joined a small group of funders and practitioners to collaborate with the Success Measures program (www.successmeasures.org) at NeighborWorks America to develop and field test a comprehensive set of financial capability outcome indicators and data collection instruments. We are excited by the prospect that these new tools will make it easier for practitioners to measure changes in low- and moderate-income consumers’ financial status, attitudes, behaviors, resilience and more. To encourage the financial capability sector to embed outcome measurement as a standard practice, The Success Measures Financial Capability Indicators and Tools are now available to the field free of charge.
What makes these tools distinct from other traditional measures that gauge the effectiveness of financial capability efforts is the inclusion of behavioral tools that address concrete things people do, as well as the strategies they employ to manage financial change over time. Data collected from The Success Measures Financial Capability Indicators and Tools can be tailored by community-based organizations to conduct structured conversations with clients on financial issues, inform changes in program design, and communicate results to a wide range of stakeholders. Financial capability funders, researchers and policymakers can analyze client data across multiple organizations working toward the same outcomes with the same set of shared, tested metrics to identify best practice, improve their understanding of factors that impact financial stability and promote innovation through public policy reform.
This collaborative field-building effort has already gained considerable traction. For example, the Youth Financial Empowerment (YFE) program in New York City has used the new tools to determine attitudes and behaviors regarding financial practices of youth in its program and is continuing to track changes over time. This will enable YFE to better help its clients cultivate a mindset about saving money that would support the transition from foster care to independence. In Oakland, the East Bay Asian Local Development Corporation (EBALDC) has been able to make use of the tools to help its clients begin to learn how to reduce their debt, while also beginning to accumulate savings.
To sustain the momentum of these and similar efforts, a two-year, $5 million grant from the Citi Foundation is supporting a scaling initiative aimed at delivering state-of-the-art financial education and coaching needed to enable families to build their savings, reduce debt and better manage their finances. As an important component of the initiative, 31 organizations are receiving training and technical assistance to use the Success Measures Financial Capability tools to conduct real-time evaluations of how the financial knowledge, attitudes and behaviors of their clients change over time.
We welcome your feedback on these new financial capability outcome evaluation tools and look forward to learning how practitioners are using them in their asset-building work. Check out the tools in the Citi-funded publication here: www.successmeasures.org/fctools.html.
FY13 Budget Neglects Education Savings and Financial Education
By Inemesit Imoh on 03/01/2012 @ 09:30 AM
“Education and lifelong learning will be critical for anyone trying to compete for the jobs of the future. That is why I will continue to make education a national mission. What one learns will have a big impact on what he or she earns: the unemployment rate for Americans with a college degree or more is only about half the national average, and the incomes of college graduates are twice as high as those without a high school diploma.” –President Barack Obama, February 13, 2012
President Obama’s recent education proposals, expressed in both the State of the Union address and the Fiscal Year 2013 Budget Request, emphasize the importance of producing more college graduates who are prepared to contribute to the high-wage, high-skill jobs of the future. As the administration has recognized, producing more college graduates begins with increasing the number of students attending college. Thus, the President is focusing on improving the quality of K-12 education and addressing the most significant hurdle that students face: Money.
According to the U.S. Census, the average total cost of attendance for undergraduate colleges and universities was $14,006 in 2007-2008. While many students are able to use federal, state and institutional grants and scholarships to cover some of their education costs, most students rely on loans. Among 2007-2008 bachelor’s degree recipients, about two-thirds graduated with student debt. Among these, 25% had borrowed $30,500 or more. What’s worse? The price tag for a college education continues to rise at rates that outpace inflation.
Students shouldn’t have to choose between tens of thousands of dollars in debt undermining their economic security and the long-term economic immobility they risk by not attending college due to insufficient funds. Lower-income students face this choice every time a tuition bill is due. Their college attendance and completion rates suffer significantly when their families lack savings and assets. Only 10% of students from low-income households graduate from college by their mid-twenties.
The President’s budget includes several proposals to improve college affordability, including making the American Opportunity Tax Credit permanent, sustaining the maximum Pell Grant award of $5,635 and a new Race to the Top initiative that would provide incentives for colleges to keep prices under control, double the number of work-study jobs and increase Perkins Loans by $7.5 billion. While it’s great the Administration is addressing some of the financial burdens that students face, this conversation is incomplete without addressing college savings and financial education for low-income students.
Many of these policies are helpful, but none of them are the silver bullet to college affordability. For instance, the Pell Grant—the need-based grant that low-income students receive from the federal government—has not kept pace with the growing cost of higher education. In 1988 the maximum Federal Pell grant covered 50% of public higher education costs but by 2009, it only covered 32%.
Promoting college savings is a critical missing element of the President’s education agenda. Studies demonstrate that youth savings is a consistent, significant and powerful predictor of college attendance. Young people that have a savings account are three to seven times more likely to attend college than children without an account. If the Administration and Congress want to increase college attendance rates, they should improve existing policies that help families save for education.
CFED recommends that policymakers advance three particular solutions that do just that; these policies expand, improve and integrate existing savings policies and account types to make them more accessible to low-income families:
- Expand the Saver’s Credit to match contributions to College Savings Accounts:
The Saver’s Credit currently rewards low-income workers who contribute to retirement accounts with a nonrefundable tax credit capped at $250. Eligibility for Saver’s Credit should be expanded to those who contribute to 529 College Savings Accounts and Coverdell Education Savings Accounts. Currently, legislation has been introduced in the House of Representatives to extend the Saver’s Credit to 529 accounts only. CFED also recommends making the Saver’s Credit refundable so that it can actually benefit low-income households with children, many of whom do not have income tax liability.
- Exclusion of Education Savings Accounts from asset tests in public benefit programs:
Asset limits, or caps on the maximum value of savings a household may have to be eligible for certain benefits programs, hurts many students who receive benefits or have family that receive benefits. CFED supports the asset limit reform because it would help low-income families save for a college education or other important assets like homeownership or simply having a strong liquid savings.
- Embedding basic bank accounts in school-based financial education:
When provided in combination with a savings account, financial education gives both students and their families a tangible way to develop and test financial decisions and opportunities, like paying for college. According to our 2012 Scorecard, 44 states now include personal finance in their curriculum standards. Programs like the Partnership for College Completion (PCC), led by UNCF, KIPP and CFED, are innovative approaches to promoting college readiness though matched college savings accounts and financial education as a part of a rigorous K-12 education.
The Economic State of America's Higher Education System
By Peter Kim, Guest Contributor on 02/13/2012 @ 03:30 PM
For years it was the dream of many Americans to send their children to college. However, it has turned into a fiscal nightmare for parents as tuition costs rise while the number of available jobs has not. Students and their families have taken huge sums of debt on the assumption that their college degree will be an instant ticket to a high-paying job, but those jobs are nowhere to be found in the current market. This spring, college graduates are entering a labor market with fewer jobs that require a college education. On top of that, a Yale School of Management study suggests college students who graduate in a recession can earn 40% less than students who graduate in better times. Higher education is turning into a bubble.
According to a 2010 report in Money magazine, the cost of college tuition has gone up 439% since 1982. Another study saw the rate of tuition growth increase four times the rate of inflation and twice as much as health care since 1978. While federal aid has offset some tuition for eligible students, their inability to find jobs has put a strain on their ability to pay back student loan payments. Some columnists blame the government for interfering with the market, arguing that federal aid encourages students to take on debt they may not be able to pay back.
As a result of the stagnant economy and continued high unemployment, college graduates are being forced to take low-paying jobs, sometimes multiple jobs, to pay bills. Graduates who took artistic disciplines have relied on freelance work to help make ends meet, but this is not enough. Others have chosen to do public service; in 2009 at the height of economic malaise, AmeriCorps reported a 42% increase in applications, of which 70% were college graduates. Still, others have decided to stay in school and go to graduate school.
Regardless, the lack of opportunities for capable graduates has forced many to return to graduate programs instead of contributing their skills to society. As a result, increased enrollment in college has resulted in the cost of higher education rising. Upon graduation, 65% of students graduate with debt, with the average student owing $24,000 in 2009. Facing unsustainable borrowing costs and a lackluster economy, graduates are finding it increasingly difficult to pay back their loans. Today, the higher education bubble is bursting at the seams as 10.8% of students at public institutions defaulting on their loans within three years of graduation (default rates at for-profit schools are double!). Today, understanding the long-term costs and benefits of attending a college will be more important than ever before. Digging deep to find grants, scholarships, and using all the resources available to you will be a great way for you to ensure a debt-free future.
For more information, watch this motion graphic created by Education News.Created By: Education News
With a passion for education and technology, Guest Contributor Peter Kim is getting involved in hopes to help innovate the way information is presented and received. Follow Peter on Twitter.