By Colleen J. Quint, President and CEO, Alfond Scholarship Fund
Reading time: Four minutes
Did you know that students with savings for higher education – even if only a few hundred dollars – are three times more likely to attend and four times more likely to graduate? While that intuitively makes sense – families that are saving for their child’s future education have an expectation that their child
will pursue and achieve that education – positive impacts exist even if it is not the family making the investment. Even modest amounts of initial savings have a strong and positive impact, and those impacts are strongest for students from low-income backgrounds.
Across the country, there are over 130 programs that make this kind of early investment. Known as Children’s Savings Account (CSA) or Children’s Development Account (CDA) programs, these efforts typically make small early investments ranging from $25
to $500, usually at birth or at kindergarten. These dollars are important and an early investment means the funds have the opportunity to grow over time. Equally important is the signal to families that someone believes in their child and their child’s
future. As one leading researcher call it, these programs represent “hope in tangible form.”
Maine’s My Alfond Grant program, is one of the oldest and most established CSA programs in the country and invests $500 at birth for every Maine resident baby. The program was opt-in for the
first four years (families were required to open a NextGen529 account – Maine’s education savings plan – by the child’s first birthday). But starting in 2013, $500 has been automatically and universally awarded to every Maine baby. By the end of 2023,
nearly 153,000 Maine children had an Alfond Grant. The foundation’s $75 million investment has leveraged two and half times that amount in family contributions as well as some matching grants from the state. All told, more than $320 million has been
invested - a market value of over $440 million at the end of 2023.
These are real dollars for real kids. A wide range of families engage in savings, and our surveys tell us that those with an Alfond Grant are twice as likely to report that they expect their child to have higher education. A longitudinal,
randomized-control trial study in Oklahoma known as SEED-OK found not only developmental gains for children and higher aspirations
by parents, but also lower levels of maternal depression.
City-based programs in San Francisco (Kindergarten to College), Boston (Boston Saves), and Minneapolis-St Paul (CollegeBound St Paul) join statewide programs in places like Pennsylvania (KeyStone Scholars) and California (CalKIDS).
All told, there are over 130 CSA programs in 38 states – and nearly 5 million children in the United States participating with early investments in higher education.
That number could get a lot bigger. US Senator Bob Casey (D-PA) introduced legislation last week that would establish a savings and investment account for every child in the US, with direct federal investments for children from lower- and moderate-income
households.
Known as 401Kids, this program will provide all children, especially those from lower-income
households, the means to realize their future - whether that’s through postsecondary education and training, a first home, starting a small business, or retirement security. This legislation is a key pillar of Senator Casey’s Five Freedoms for America’s Children. The Act would enable state Treasurers or equivalent to establish 401Kids Savings Accounts within Section 529 Qualified Tuition Programs. 401Kids will be automatically established by participating
states for all newborns and children under age 18 with a federal backstop for kids living in states that choose not to participate. Contributions will be encouraged from states, parents, nonprofits, foundations, employers, and other sources, though
capped at $2,500 from all sources combined. Direct federal deposits would be made for low- and moderate- income families, with additional and matching deposits for families eligible for the Earned Income Tax Credit. With this design, an EITC-eligible
family could generate up to $1,000 in federal deposits each year.
This bold proposal would build on the good work already being done in cities and states across the country. Furthermore, it would ensure all children, especially those who would most benefit, to know from birth that there are real dollars invested for
their future.
Ensuring that all children – especially our most vulnerable – have the opportunity to aspire to, access, and complete higher education will require many different strategies. Partnerships between CSA programs and like-minded and mission-aligned organizations
that are focused on college access and attainment could bring the energy, expertise and leverage to make those promising opportunities a reality.
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