All children deserve the opportunity to pursue their dreams of becoming a veterinarian, astronaut, teacher, or whatever they desire. Without an education, however, many of these dreams will remain unattainable, as will the economic mobility these careers provide. Knowing that there’s a plan in place and savings accumulating for college is a strong motivator for many children, but too few children have the security of a college nest egg.
My children’s experience is a testament to the power of college savings. Having an affordable, fixed-rate, long-term mortgage allowed me to also set aside money for my children’s college education. Despite ups and downs in the stock market and some losses in my kids’ college savings plans, significant savings accumulated because we started saving for their postsecondary education as soon as they were born. The savings were not sufficient to cover all of their college costs—they still need scholarships, grants, savings from summer jobs, and help from parents and grandparents—but they were large enough so that my kids never doubted that they would have the financial wherewithal to go to college.
At Woodstock, we’re working towards a future where all children could grow up with a savings account started at birth like my kids had. Research shows that children with a savings account in their name are six times more likely to attend college than children without such accounts, and that having financial and non-financial assets (such as equity in a house, vehicle or business) is positively correlated with attending and completing college. Controlling for other factors, including income, assets have a significant, positive effect both in terms of financial ability to attend college and in the aspirational impact on children and parents.
While the day that all children have savings accounts at birth is a ways off, there are steps we can take now to expand access to postsecondary education for more children. The Illinois Asset Building Group is urging that we take the following steps:
• The State Treasurer, who administers Illinois’ Bright Start 529 College Savings Plan, should provide a safe, conservative, default 529 investment plan for new applicants to simplify the process for families with little or no investment experience.
• The State Treasurer should accept Individual Taxpayer Identification Numbers (ITINs) in lieu of Social Security numbers for Bright Start account owner parents or guardians so that American children of immigrants can participate in the program. (UPDATE, 10/11: We are pleased that the Office of the State Treasurer has informed us that the Bright Start program recently started accepting ITINs in lieu of Social Security Numbers).
• The State of Illinois should create a college savings incentive program for children of noncustodial parents who owe child support arrears.
• The State of Illinois should eliminate requirements in the Temporary Assistance for Needy Families (TANF) program that disqualify applicants with more than $2,000 in assets or exempt education savings accounts from the asset limit so that parents of minor children who are in need of short-term cash assistance are not discouraged from, or penalized for, saving for their children’s postsecondary education. (Six states have already abolished TANF asset limits.)
I strongly support these policy recommendations and look forward to the day that all Illinois children can have savings accounts from birth that will help them to achieve their dreams.