Promoting savings as a way of building assets has long been a focus of Southern Bancorp’s work, which is why we were so excited to read CFED President Andrea Levere’s op-ed in last month’s New York Times that highlighted the effectiveness of Children’s Savings Account (CSA) programs. CSAs have been a household term and practice throughout the family economic security field for over a decade. They come in all shapes, and sizes, ranging from accounts held by private financial institutions to demonstrations run by research universities to 529 plans administered by a state government entity. Like Individual Development Accounts (IDAs), CSAs are designed to make opportunities possible for economic mobility – in essence, they are savings accounts created to establish a foundation for children to ultimately increase their net worth, whether it be by achieving a post-secondary educational degree, buying a home, and/or starting a business, all key indicators of economic mobility in Southern’s view. While CSA programs are still relatively small in number, they’re starting conversations in families about planning and paying for higher education early.
Throughout the last ten years, Southern has engaged in a variety of CSA programs in Arkansas and Mississippi. In addition to offering IDAs, Southern has participated in the SEED demonstration, Save for America program, Aspiring Scholars Matching Grant Program, and the Mississippi College Savings Account initiative. While all of these programs have had great success in providing savings accounts for Arkansas and Mississippi children, scalability and sustainability for the programs has been challenging.
Throughout the country, several universal CSA programs have emerged at the city, county, and state levels. As Ms. Levere’s op-ed points out, the Kindergarten to College initiative in San Francisco has sparked national interest by delivering CSAs to all San Francisco public school kindergartners. The city of St. Louis is planning to unveil a similar program in fall 2015. Cuyahoga County (Cleveland), Ohio launched its own CSA program by establishing a savings account for every child entering kindergarten in fall 2013. Further, Colorado, Hawaii, Maine, and Nevada have implemented or have started the process of implementing different models of CSA programs in their states using various government agencies, all providing a CSA to a child at a particular grade or age level.
As mentioned earlier, Southern was behind the Aspiring Scholars Matching Grant (ASMG) program, enacted by Act 597 through the Arkansas Legislature in 2007. The ASMG program provides a savings incentive to low and moderate income families by matching funds saved for their child’s college education in the state’s 529 GIFT College Investment Plan. The ASMG Program provides matching grants of up to $500 per year to eligible students, based on a household’s income level. The ASMG program was only enacted to serve as a two-year pilot. The funds came from a surplus in management fees charged on all GIFT Plan accounts. Despite management fees continuing to fund the matches, the legislative funding source has officially ended.
Undeniably, the ASMG program successfully served its purpose to financially assist low-to-moderate income families in saving for post-secondary education; however, less than 1 percent of Arkansas children have an ASMG account established for their benefit. Hence, the program’s reach is limited, and as noted earlier, it does not have a legislatively committed funding source. That said, the management fees are still being collected on the GIFT Plan accounts, which means there is a pot of money there that could be reallocated for other purposes. In the State of Nevada’s Treasurer’s Office, management fees on their 529 college savings account plans serve as seeds to establish a $50 account for all Nevada public school kindergartners.
Based on U.S. Census data, Arkansas has approximately 41,000 kindergartners. If Arkansas sought to seed every Arkansas public school kindergartner a $50 account through its 529 GIFT Plan using management fees, it would cost around $2 million per year. And here’s why we think this is so important for Arkansas lawmakers to consider:
- According to the Georgetown University Center on Education and the Workforce analysis on occupation data and workforce trends, 52 percent of Arkansas’s jobs will require some kind of postsecondary education or training by 2018. Right now, only 21 percent of the population holds a four-year college degree, with 27 percent having a two-year degree.
- Putting every child on the same starting line at a young age and showing them they have options after high school will increase the economic mobility of Arkansas’s children and better enable them to contribute positively to Arkansas’s future.
- Building a college-bound culture will help prepare the future workforce Arkansas needs to attract well-paying jobs.
- Further, a recent study finds that children with savings accounts in their name, including 529 plans, could be up to seven times more likely to attend college if those children expressed an expectation to attend college – regardless of family income, ethnicity, or the educational attainment of the child’s parents.
If all Arkansas children were on the same level playing field, their opportunities for educational attainment, career advancement, and asset-building would be significantly improved. As a Community Development Financial Institution (CDFI), our mission is to create economic opportunities for people in rural communities, so supporting post-secondary education through savings is a natural fit.
To learn more about our efforts, please contact Meredith Covington, Policy & Communications Manager, at email@example.com.
DeLong, KR. (2009). Aspiring Scholars matching grant program: A successful first year. Policy Points, Vol. 33. Little Rock, AR: Southern Good Faith Fund Policy Program. Available at https://southernpartners.org/assets/archived_publications/pub_pp/pp_v33_9_09.pdf.
Covington, M., & Edwards, T. (2014). Evaluating college savings plans: A case study on Arkansas and Mississippi. Policy Points, Vol. 41. Little Rock, AR. Southern Bancorp Community Partners Public Policy Program. Available at https://southernpartners.org/assets/PP_VoL41_20140428.pdf.
Nevada State Treasurer website. Available at http://www.nevadatreasurer.gov/CollegeSavings/CSP_Home/.
CFED. (2013). Assets & Opportunity Scorecard. Available at http://scorecard.assetsandopportunity.org/2014/state/ar.