The mayor of New York has announced a new child savings account to help thousands of New York City public school children save for college. City officials relied on research from the Center for Social Development (CSD) to develop the three-year pilot program, which starts next fall.
“The steep cost of higher education has left too many New Yorkers unable to afford a college degree,” Mayor Bill de Blasio said in a press release. “With this initiative, every child — regardless of their family’s economic status — will have a fighting chance to access higher education.”
Conversations between the city’s Office of Financial Empowerment and CSD Policy Director Margaret Clancy began in late 2014, when she shared research findings from SEED for Oklahoma Kids (SEED OK) and policy experience working with state 529 plan leaders.
The program is being financed by a $10 million gift from Jon and Mindy Gray; Jon Gray is the head of global real estate at the investment firm Blackstone Group. Using NY’s 529 College Savings Program as its platform, the initiative, called “NYC Kids RISE,” will enable children to have access to financial resources for use toward a postsecondary education, according to the Office of the Mayor.
“For the United States to succeed in the long run, our children must grow up to become educated and effective citizens,” said CSD Director Michael Sherraden. “New York City is taking a crucial step to ensure a better future for its children.”
In its first year, the program will kick off as a pilot in one city school district with about 3,500 kindergarteners. Those kindergarteners will each start with $100 in a scholarship account, plus up to an additional $200 in matching funds during the program’s first three years. All kindergarten students in the pilot district will be automatically enrolled, and there is no cost to participate.
“With an initial deposit into these automatic New York 529 college savings plan accounts, New York City children will grow up knowing they have assets for postsecondary education — and a better chance to reach their highest potential,” Clancy said.
‘Powerful, positive impacts’
Ensuring that all children have college savings is important because modest savings have financial and nonfinancial benefits for children and their families, Clancy said. “CSD research shows that these accounts have powerful, positive impacts — improving mothers’ expectations for their children’s education and disadvantaged children’s early social-emotional development.”
SEED OK is a large-scale policy test of automatic and progressive Child Development Accounts (CDAs), also called child savings accounts, and it is the first universal model in the United States. New York City will use NY’s 529 College Savings Program, a model similar to the one CSD demonstrated in the SEED for Oklahoma Kids, which began in 2007 and uses that state’s 529. Because of the automatic accounts and initial deposits for all children, SEED OK has large impacts on OK 529 savings among disadvantaged children, Clancy said.
Several states and municipalities, including St. Louis, have provided educational accounts for children with guidance from CSD. Maine’s College Challenge was the first statewide, universal CDA in the nation; the program now automatically deposits $500 into a 529 college savings plan on behalf of every child born in Maine. The Nevada College Kick Start program automatically deposits $50 into an account for every public school kindergartner in the state. Both states’ college savings (529) plans offer savings matches to state residents, as well.
This year, the Singapore government significantly expanded its CDAs with an automatic deposit of S$3,000 (about US$2,220) into the CDAs of all newborns. And in Israel, a new law takes effect in January 2017 to establish CDAS for all resident newborns.
About the Center for Social Development (CSD): Founded in 1994, CSD creates and studies innovations in policies and practices that enable individuals, families and communities to formulate and achieve life goals, and contribute to the economy and society. CSD is based at the George Warren Brown School of Social Work at Washington University in St. Louis.