WASHINGTON U.-ST. LOUIS (US) — Young people with a savings account in their own name are six times more likely to attend college than those without an account.
The findings underscore the importance of policies and programs that help Americans of all income levels save for college.
“The ultimate goal is to increase post-secondary education access and completion rates, particularly among lower-income students,” says Margaret Clancy, policy director and College Savings Initiative director at the Center for Social Development at Washington University in St. Louis. “That’s why the College Savings Initiative includes innovative public policy and reforms to 529 college savings plans.”
Arne Duncan, U.S. secretary of education, cited the new study, published in the Journal of Children and Poverty, when announcing a partnership with the Federal Deposit Insurance Company and the National Credit Union Association to improve financial education, savings and college access for low- and moderate-income students.
“Previous research has stopped short of assessing relationships between assets and college completion, and very limited research has examined the associations between different types of assets and liabilities and college success,” Clancy says.
Controlling for family income and other factors, both financial assets—such as savings accounts, IRAs, or CDs—and non-financial assets—such as equity in a home, vehicle, or business—are positively related to children’s college completion. In other words, it is assets, and not income, that is associated with college success.
“In this study and others, there is evidence that the positive effect of savings may be more than economic— assets are related to changing the college expectations of parents and children,” Clancy says.
A review of 38 studies on household assets and children’s educational success finds that household assets have a significant independent effect on whether children attend and ultimately graduate college.
Influenced in part by this research, programs and policies increasingly support college savings for families of all income levels. San Francisco’s innovative Kindergarten to College program, a city-funded college savings program, was launched in the fall of 2010 and will eventually offer an account with a seed deposit to every kindergartner in the San Francisco public schools.
“The account is not just a vehicle for savings but a vehicle for hope,” Secretary Duncan said in his message.
At the federal level, President Barack Obama has proposed “Bank on USA,” a program to facilitate access to affordable deposit accounts and basic financial services to unbanked American families.
“Obama has set a goal that by the end of the decade America will once again lead the world in college completion,” Duncan said. “These initiatives will play a critical role in helping our students go to college, succeed there, and help our country meet the president’s goal.”
The College Savings Initiative (CSI), a collaboration of the Center for Social Development (CSD) and the New America Foundation, aims to increase access and completion of post-secondary education among low- to moderate-income students, and is supported by the Bill & Melinda Gates Foundation and the Lumina Foundation for Education.
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