2017 News

Report explores statewide Child Development Account policies

Four states have created statewide Child Development Account (CDA) policies, and a new report describes them in detail with the intent of informing new initiatives in the United States.

CDAs are savings or investment accounts for long-term developmental goals, typically postsecondary education. In “Statewide Child Development Account Policies: Key Design Elements,” Center for Social Development (CSD) researchers at the George Warren Brown School of Social Work identify 10 key CDA design components, originally modeled by SEED for Oklahoma Kids (SEED OK)—a rigorous research test of social policy. Four design elements are central to addressing inequality:

  • Universal eligibility so that children of all economic backgrounds participate;
  • Automatic, opt-out enrollment;
  • Initial deposits from the CDA sponsor; and
  • Subsidies that are progressive.

The four statewide CDAs are in Connecticut (Baby Scholars), Maine (Harold Alfond College Challenge), Nevada (College Kick Start) and Rhode Island (CollegeBoundbaby). CSD’s SEED OK research experiment informed policy design elements of each of the CDAs. All four CDAs are built on the state 529 college savings plan. (Nationwide, over 85 percent of CDA accounts are held in 529s.)

Since 2014, Maine newborns are automatically enrolled in the CDA at birth. The College Challenge puts $500 into an account for the child, and the state 529 plan offers a match up to $300 per year, depending on how much the child’s family saves, though they’re not required to contribute.

Nevada College Kick Start, which deposits $50, also has opt-out enrollment: Kindergarten students at public schools are automatically enrolled. However, because private school and homeschool students are not included, the CDA does not yet have universal eligibility.

Rhode Island parents must check a box on the birth worksheet to receive a $100 deposit into an account for their newborn. This check-box enrollment greatly streamlines participation but does not include all children. Connecticut requires new parents to open a 529 plan account in order for their newborn to receive the initial $100 CDA deposit. The state facilitates account opening for new parents, a step in the right direction, but the account requirement still substantially reduces participation and inclusion, according to the report.

“The four statewide CDAs are evolving. Policy changes have made the CDAs more accessible, efficient and inclusive, and they continue to improve,” says Margaret Clancy, College Savings Initiative director at CSD and co-author, with Sondra Beverly, of the new report.

For more than a decade, CSD researchers have been studying the impacts of CDAs. Clancy started researching children’s accounts and 529 college savings plans in 2001, eventually overseeing CSD’s launch of the SEED OK experiment in 2007. Rigorous experimental evidence from SEED OK has shown that an automatic CDA with an initial $1,000 deposit can have important positive impacts in the first four years, including improving mothers’ expectations for their children’s education, mothers’ mental health, and disadvantaged children’s early social-emotional development.

In August, Clancy presented findings at the Midwest Children’s Savings Account Consortium held at the Federal Reserve Bank of Chicago. The broad policy vision is for every newborn to automatically receive a substantial initial deposit and for low-income children to receive additional subsidies. The statewide CDAs are important to this effort.

“A future national policy will be informed by the statewide CDAs, which model key design elements, forge partnerships, and resolve challenges. These four states have made significant advancements toward an efficient and fully inclusive CDA policy that reaches all children nationwide,” Clancy says.