This week, the state of Maine became the first in the United States to make college savings for newborns universal and automatic, putting into practice research pioneered by Michael Sherraden and the Brown School’s Center for Social Development at Washington University in St. Louis.
A college savings account in a child’s name not only gives parents hope for the future, it also results in improved social-emotional health for their children.
When every dollar is spent on necessities like diapers, gasoline and utilities, saving for college may be the furthest thing from a new parent’s mind. Mothers participating in a research study, however, suggest that a college savings account with $1,000 makes them feel optimistic about their children’s postsecondary education.
State-sponsored college savings plans, often called 529 plans, offer tax incentives to facilitate saving for postsecondary education. Low- and moderate-income families are less likely to have college savings than higher-income families.
Evidence supporting the link between savings and college success is growing. Three studies out of the Center for Social Development at the Brown School at Washington University in St. Louis offer a connection between assets and college enrollment and completion.
Earnings in 529s grow free from federal income tax when used to pay for qualified educational costs. Many states, like Oregon, offer a tax deduction for families saving in the state 529 plan. Yet tax incentives provide more benefit to people with higher incomes.
CSD conducted a webinar on assets and education on February 17th hosted by the Asset Funders Network.
States use a variety of 529 policy strategies to make it easier for low-and moderate-income families to save for college.
Through the College Savings Initative, CSD and the New America Foundation will examine innovative ways to create more inclusive 529 college savings plans.
The Federal Reserve Bank of St. Louis devoted a feature article in the spring issue of its publication, Bridges, to Child Development Accounts, an innovative tool for making long-term investments in children.
The Center for Social Development announces the publication of the March 2009 SEED Account Monitoring research report.