CSAs Build Students’ College Savings and Aspirations
The data from the 2016 Assets & Opportunity Scorecard is out, and seven years after the recession, financial insecurity is still the norm for too many American families. Take, for example, liquid asset poverty. More than 40% of all American households are “liquid asset poor,” meaning they lack a sufficient savings cushion (i.e., assets in the form of bank accounts and other savings that can easily be liquidated) to subsist at the poverty level for just three months in the absence of income. What’s more, households of color are especially vulnerable—nationally, almost two-thirds of households of color are liquid asset poor.
These findings raise troubling questions about the ability of millions of Americans to make investments in lifelong assets, such as homes, businesses and education, all of which are closely correlated with financial stability. In particular, achieving the dream of higher education in the United States is increasingly becoming a “pay to play” proposition. The intersection of several disturbing trends in higher education finance have contributed to this unsustainable system, including:
- College tuition rates rising faster than inflation.
- Federal support for lower-income students—Pell grants—that has not kept pace with rising tuition costs.
- Shrinking state investments in higher education that have forced public institutions to raise tuition to make up the difference.
With the burden of paying for college falling increasingly on individual households, it’s no wonder that less than 10% of low-income students finish college by their mid-twenties.
In this challenging environment, policymakers are looking for innovative and proven solutions. One promising strategy is Children’s Savings Accounts (CSAs)–dedicated savings accounts that often include an initial deposit, plus progressive matches for lower-income children and provisions that restrict the use of incentives to post-secondary education. Research shows that low-income students with up to $500 in college savings are three times more likely to enroll in college and four times more likely to graduate.
Today, the City of Oakland is announcing the launch of its Oakland Promise initiative, a new public-private partnership to make the dream of post-secondary education a reality for all Oakland children. One key component of Oakland Promise is that every child enrolled in kindergarten will automatically receive a CSA with an initial deposit and incentives for them and their families to save. This comes just a few weeks after good news from the other side of the country, where the City of Durham, NC, launched a CSA pilot for all kindergarten students at an inner-city elementary school as part of the mayor’s Poverty Reduction Initiative.
To support these efforts, CFED and partners across the nation have launched the Campaign for Every Kid’s Future. The mission of the Campaign is to raise the visibility of the children’s savings movement, and by doing so, to move toward a future in which every child in the United States will have a CSA in his or her name. We encourage a range of stakeholders who have an interest in building post-secondary savings and aspirations, including policymakers, financial institutions, local providers, child advocates and researchers, to join the Campaign because the opportunity economy we want and need requires all of us to come together.
Here’s what you can do to help put college within reach for more children: