KU researchers push for government-funded college savings accounts for children

I personally have over $100,000 of student loan debt so no, I do not speak from a privilege position. Further, I grew up poor and was homeless at times, I could go on but I say this just to say I do understand how hard it can be to save. That is why it is very important to start when the child is very young. It is also important that we encourage saving among the poor in ways that we encourage saving among the middle and upper class through 401K plans and tax credits. There are ways to help even very poor people save some and there is research that shows even the poor can save when given access to the same institutional mechanisms that others benefit from. However, I would not say that CDAs are a silver bullet and that they will solve all of our college financing problems but a part of the puzzle. Moreover, I should add to this conversation that they are not just for the poor but a universal program for all children.

February 2, 2013 at 1:31 p.m. ( permalink | suggest removal )

KU researchers push for government-funded college savings accounts for children

I should also add, this does not mean that we should not be actively pursing ways to reduce the cost of college. Starting a CDA program is not at odds with also holding universities, states, and the federal government to finding ways to drive down the cost so that the savings is more effective. We can do both.

February 2, 2013 at 1:02 p.m. ( permalink | suggest removal )

KU researchers push for government-funded college savings accounts for children

The conversation we are having about children's savings is not about whether government should provide any money for education, it already does and they likely will for some time given that China is now doubling down on investing in education because they understand that it is the next arms race to see who will make the batteries of the future, for example.

The question for me, is how best to use that money in a way that also aligns with American values such as our belief in personal responsibility. CDA programs require that families and children have a stake in the game and invest some of their own money and effort if they want to be successful.

For example, research shows that student loans:
• Can lower expectations for attending college; and in turn, preparation for college.
• Evidence is mixed at best on whether student loans actually increase enrollment in college.
• Over $10,000 in student loans reduces the chance that students graduate from college.
• Student loans reduce overall financial health of households (that is it reduces the return on college; households with a college graduate and outstanding student loans have less net worth than households with a college graduate and no loans).

In contrast research shows that child savings:
• Raise expectations for attending college; and in turn, preparation for college.
• Increases enrollment in college.
• That even small amounts of school savings increase the chance of graduation.
• Reduce the amount of student loans needed (We just need to cut loans down below $10,000 right now the average loan amount is about $26,000; don’t have to pay for full tuition through saving).
• That early savings improve financial outcomes into adulthood.

It is not about being a democrat or a republican, it is about making better decisions about how we spend our money while promoting our beliefs as American's in personal responsibility. It just seems like saving might be a better investment than increasing students' ability to borrow. We might all agree on that.

February 2, 2013 at 12:59 p.m. ( permalink | suggest removal )