The economic success and post-recession recovery of the United States relies on the
health and well being of its children. Yet, nearly one in four children in North Carolina
live in poverty. Children who grow up in poverty are at risk for a host of poor outcomes,
both in childhood and as they transition into adolescence and adulthood. Education has
been seen as a way out of poverty, but rising tuition costs are increasing the debt
burden on low-income students. Social investments that promote wealth accumulation,
such as Children’s Savings Accounts, are essential to creating opportunities and
preparing the next generation to become a productive and innovative workforce.
Students with even small amounts of savings under $500 are three times more likely to
enroll in college and four times more likely to graduate. Results from initial CSA
program studies have been promising, including improved social-emotional
development among children, reduced maternal depressive symptoms and increased
college expectations among children and parents. A state CSA program would have an
Table of Contents
Abstract 2
Abbreviations 4
Introduction 5
Overview of Children’s Savings Accounts 8
History 8
Defining the Core Components of Children’s Savings Accounts 9
Literature Review 10
CSA Studies 14
Federal Policy 20
State Policy 21
Maine 21
Nevada 23
North Carolina Programs 25
North Carolina 529 Plan 26
Policy Recommendations 27
Conclusion 28
Abbreviations
ADD American Dream Demonstration
CDA Child Development Account
CFED Corporation for Enterprise Development
CSA Child Savings Account
CSD Center for Social Development
IDA Individual Development Account
LMI Low- and moderate-income
SEED Savings for Education, Entrepreneurship, and Downpayment
Introduction
The economic success and post-recession recovery of the United States relies on the
health and well-being of its children and their ability to contribute to society. Yet, nearly
one in four children in North Carolina live in poverty and half of North Carolina’s children
are poor or near poor.1 Certain communities are hit especially hard by child poverty.
These areas of concentrated poverty, where children live in census tracts with poverty
rates of 30% or more, have increased by more than 50% in the past five years.1 In order
for children to succeed, they need to live in thriving communities that support and
facilitate their healthy development. Social investments that promote wealth
accumulation, such as Children’s Savings Accounts (CSAs), are essential to creating
opportunities and preparing the next generation to become a productive and innovative
workforce. CSAs serve not only as an anti-poverty strategy but also as an asset-building
strategy, an important distinction in order for families to become self-reliant.
Children who grow up in poverty are at risk for a host of poor outcomes, both in
childhood and as they transition into adolescence and adulthood.2 Health issues that
are linked to poverty include higher infant mortality rates, higher rates of low birth weight
babies, greater risk of chronic disease, and increased risk of unintentional injury and
mortality.2 Poor children are more likely to experience trauma, to have poor educational
outcomes, to engage in criminal behavior, to experience a teen pregnancy, and to be
poor as adults.2 Poverty can lead to behavioral and mental health issues, as well as
toxic stress, which can impact a child’s ability to do well in school.2 Adults who were
issues, respiratory conditions and osteoporosis.2 When children grow up in poverty, it is
not just the individual that suffers but society as a whole.
Education has long been seen as a way out of poverty and this assumption is
reflected in the statistics on poverty and education. Only 5% of people 25 and older who
hold at least a Bachelor’s degree live in poverty, compared to 14% with a high school
diploma but no college education, and 29% without a high school diploma.3 Of all US
adults 25 and older, only 12% do not have a high school diploma and yet they make up
28% of those living in poverty, representing a disproportionate number of those affected
by poverty.3 These statistics illustrate the direct impact of education on poverty, as the
higher your educational attainment, the less likely you are to live in poverty.
Despite this correlation, rising college costs are making it increasingly difficult to
afford a college education. Additionally, parental educational attainment is a strong
predictor of children’s educational attainment in the United States.4 Families that are
living in poverty will have more difficulty financing college, perpetuating the cycle of
educational attainment for the next generation. While there are benefits to attaining
even some college, the highest return on investment occurs when a student completes
their college degree.4 Of all students that enrolled in a four-year college in 2004, only
58% of those students graduated within six years.4
As tuition costs rise, students become increasingly dependent on student loans
to finance their education.4 Small loans may have the intended effect of helping
students graduate from college; but, as college debt rises, the likelihood for students to
complete college drops off.4 For students who have less than $10,000 in debt, there is a
chance of completing a college degree for students with $20,000 or more.4 Student
loans can also influence a student’s ability to become economically secure once they
graduate from college.4
Although child poverty can have a negative impact on society as a whole,
developing a more educated workforce has positive effects at the population level. A
college-educated workforce can benefit society through increased tax revenues, a more
productive workforce, greater consumption, and fewer people needing government
assistance, which leads to greater self-reliance.5 Aside from these benefits, North
Carolina will continue to need a highly educated workforce in order to meet its
occupational needs. Projected growth in healthcare, community services and arts,
management and STEM industries will require higher levels of postsecondary
education.6 A projected 1.5 million jobs will be available in North Carolina from 2010 to
2020 with 932,800 of those jobs requiring some postsecondary education.6 Maintaining
the same trend as that from 2010, 61% of jobs in North Carolina will require
postsecondary training or education by 2020.6
Due to the fact that poverty affects educational attainment, and conversely that
educational attainment impacts poverty, a well-designed policy solution would target
both poverty and educational attainment. CSAs have been proposed as a way to
increase college completion among low- and moderate-income (LMI) students while
reducing the college debt burden.4 They are gaining traction as a plausible way of
increasing college-going expectations among students who might not otherwise see
college as an option.4 CSAs are increasingly being shown to shape the way that
educational outcomes. Students with even small amounts of savings under $500 are
three times more likely to enroll in college and four times more likely to graduate.4 While
student loans are not available until a student attends college, CSAs can start as early
as birth and serve as a long-term investment that impacts behavior and college going
expectations.4
The following sections outline the history and core components of CSA programs
and include a literature review of key findings from the research on assets and child
well-being, as well as early findings from CSA programs. Federal and state CSA
policies are explored including a description of the first statewide CSA programs to be
implement. A discussion of CSA pilot programs in North Carolina and the NC 529
college savings plan leads into policy recommendations for implementing a statewide
CSA program in North Carolina.
Overview of Children’s Savings Accounts History
The concept of CSAs was first introduced by Michael Sherraden in 1991 in his
seminal work Assets and the Poor: New American Welfare Policy.7 He made a
distinction between assets and income and proposed CSAs as a long-term investment
to help low-income children and families to accumulate assets.4 When the accounts
were first proposed, they were referred to as Child Development Accounts (CDAs) due
to the long-term vision of promoting children’s development and well-being.7 Initially the
accounts were thought of broadly to be used for education, homeownership, or other
long-term investments, but now are more commonly thought of as savings vehicles for
In 1994, the Center for Social Development (CSD) was founded at the Brown
School of Social Work at Washington University in St. Louis, sparking a new body of
research on asset-building and social development.8 A few years later, the Corporation
for Enterprise Development (CFED) launched the American Dream Demonstration
(ADD) in 1997 with research support from the CSD.9 This demonstration project was the
first study to examine savings outcomes for low-income individuals participating in
Individual Development Account (IDAs) programs, which are subsidized savings
programs.9 The study ran from 1997-2001 and results from the 14 programs
demonstrated that low-income individuals can save in IDAs.9 Though small, participants
saved nearly $20 a month, accumulating approximately $700/year with a savings match
of 2:1.9 The Assets for Independence Act was passed in 1998, providing grants to
agencies in order to offer IDA programs for low-income families.4 Although IDAs were
first introduced as long-term savings vehicles to help low-income families accumulate
assets, they were implemented as short-term programs to help families and households
become self-sufficient.4 Therefore, CSAs eventually emerged in the place of IDAs as
accounts that would be opened at birth and allowed to grow over time.4
Defining the Core Components of Children’s Savings Accounts
Even though CSA models differ from program to program, they are commonly
viewed as meeting a specific set of criteria. In order to be considered a CSA program, a
savings initiative should be long-term so that savings can grow over time, designated for
a specific purpose such as postsecondary education, should have monetary incentives
and should be restricted so that it can only be used for a designated purpose, according
that have been used to define CSA programs are that they offer financial education, that
they help families to access financial products and services, and that they provide seed
money into a savings account.4 These criteria can be thought of as what distinguishes
CSA programs from a simple college savings account.
Since CSAs were proposed as a way to help LMI children obtain assets for future
use, additional criteria can help to ensure that this target population benefits from the
program. According to Carl Rist, CSA programs that are informed by best practices are
universal, automatically opened, and progressive (email communication, March
2016).For an account to be considered universal, it must be fully inclusive so that all
children may receive an account.10 Automatic account opening ensures that all children
are able to participate in the program.10 Finally, a progressive program means that LMI
participants have additional opportunities to save through matched funding.10 Programs
that are considered to meet these criteria are the Harold Alfond College Challenge in
Maine, Kindergarten to College in San Francisco, CA, Promise Indiana, Lansing Save in
Lansing, Michigan, and CHET Baby Scholars in Connecticut (C. Rist, email
communication, March 2016).
Literature Review
The link between assets and well-being is documented in intersecting fields of
research including the literature on poverty, education, asset development and child
well-being. One example of this relationship is the Great Smoky Mountains Study of
Youth, a quasi-experimental, longitudinal study of child mental health in western North
Carolina.11 The study followed 1420 American Indian and non-Indian children from 11
Indians.11 Survey data was then weighted in order for the findings to be representative
of school-aged children in the region.11
While the study was ongoing, a casino was opened on the Eastern Band of
Cherokee reservation and the profits were disbursed to tribal members.11 Adult tribal
members received an average of $4000 per person each year. The study utilized a
randomized selection process; however, there were minor differences across age
cohorts including statistically significant differences in the number of American Indian
children and household income levels. The cohorts were similar on parental education
levels and gender distribution. Despite the statistically significant differences for
household income level, the authors concluded that the extent of the differences was
minimal and that on average, the age cohorts were similar across households.11
This study documented the improved outcomes for the children whose families
received the casino disbursement, including improved educational outcomes and
decreased criminal behavior.11 Children in households that received the cash
supplement were more likely to graduate from high school, had an additional year of
education among the lowest income households, and had lower levels of criminal
behavior.11 Important takeaways were that children had better outcomes the longer they
lived in households that received the supplemental income, and that children in the
lowest income households saw the greatest overall improvements.11
Further analysis showed that the supplemental income did not increase the
amount of time that parents spent with their children, which is one possible explanation
for how increased income leads to improved outcomes.11 Instead the data indicated that
This finding supports the assumption that improved parental interactions mediates the
relationship between income and improved child outcomes.11
Similar findings were observed when children’s neighborhood environment
changed. A recently published study examined what happens to children when their
families were randomly selected to receive a housing voucher that gave them the
choice of moving from a neighborhood with high poverty rates to a neighborhood with
lower poverty rates.12 Children who were under the age of 13 when they moved from a
high poverty neighborhood to a lower poverty neighborhood were more likely to attend
college and had an average annual income that was 31% higher than that of the
comparison group.12 Furthermore, these children were more likely to live in lower
poverty neighborhoods as adults and were less likely to become single parents.12 These
positive benefits were more pronounced the younger a child was when they moved,12
suggesting that the sooner an investment is made to address child poverty, the greater
the return.
A review of the literature on assets and children’s educational outcomes
summarized the relationship between household assets and children’s educational
attainment, the relationship between children’s savings and children’s educational
attainment, and the relationship between assets both parents’ and children’s
expectations.5 In this review, children’s educational attainment is broken down into three
categories: academic achievement, college attendance and college completion.
Academic achievement is further broken down into math achievement and reading
achievement. The types of assets are also broken down into net worth, which are the
Of 11 studies that were reviewed linking assets and academic achievement,
household assets were a predictor of children’s math achievement but were not a
consistent predictor of reading scores.5 One possible explanation for the failure of
assets to predict reading scores is that only one study measured reading ability over
time. Additional studies measured reading at one point in time, which may not be an
adequate measure of reading achievement. Net worth and liquid assets best predicted
math scores while illiquid assets had little effect on math achievement.5 Furthermore,
household assets were significantly associated with college attendance and completion.
Early liquid assets are a strong predictor of college attendance, with a greater impact on
low-income children.5 This finding in particular suggests that children’s savings
accounts may be a salient way of improving college attendance among children from
disadvantaged households. While liquid assets may help predict college attendance,
studies show that both liquid assets and net worth are important predictors of college
completion.5
The relationship between children’s savings and educational attainment is
distinct from household assets and educational attainment, as children’s savings are
reserved for a specific use.5 This distinction may be important for LMI children, since
low-income families must prioritize how they will utilize their limited resources. Once a
family takes care of their immediate needs, they may not have any remaining assets to
be reserved for future costs such as postsecondary education. In this case, it can be
empowering for a child to have a savings account specifically reserved for their future
Further review of the literature shows that children’s savings are associated with
both short- and long-term outcomes. In other words, children’s savings positively impact
math achievement as well as college outcomes.5 Reading achievement, on the other
hand, is not associated with children’s savings. Having money saved for educational
purposes has a significant impact on students, making them two times more likely to
attend or graduate from college.5 These findings are especially true for LMI children, but
do not hold true for high-income children. Savings can help to bridge the gap between
college expectations and college attainment, since over half of children without savings
who intend to go to college do not end up going.5 Among children who expect to
graduate from a four-year college, having even basic savings is associated with a six
times greater likelihood of attending college.5
Finally, thirteen studies were reviewed examining the link between assets and
expectations. A number of studies found that the relationship between assets and
expectations is bi-directional, or that assets have an impact on expectations and
conversely that expectations have an impact on assets.5 College expectations are
viewed differently across studies with some researchers defining college expectations
as a linking mechanism between assets and educational outcomes, and others defining
them as a mediator between the two.5 The studies reviewed suggest an overall
relationship between assets and expectations, even after controlling for other variables.5
Further research can help clarify the pathway between assets and expectations.
CSA Studies
Much of the existing literature on CSAs comes from two studies, the Savings for
completed in 2008,13 and the SEED for Oklahoma Kids (SEED OK) study, a randomized
controlled trial that began in 2007.10 SEED was a national CSA demonstration project
that partnered with 12 community organizations throughout the US to establish over
1,300 SEED accounts.10 Partner sites in St. Louis, MO, Wilmington, DE, Tahlequah,
OK, Austin, TX, San Juan, PR, New York, NY, San Francisco, CA, Denver, CO,
Philadelphia, PA, Chicago, IL, and Pine Bluff, AR housed approximately 75 participant
accounts each, targeting different age groups and utilizing a variety of models.10 The
remaining site in Pontiac, MI hosted nearly 500 accounts and was part of a
quasi-experimental study of three- and four-year olds participating in Head Start
program.10 Multiple methods of data collection were used including account monitoring,
in-depth interviews, cross-sectional surveys and an impact study.10
Results from SEED demonstrated that even families living in poverty can
contribute to a savings account when participating in a CSA program.14 In fact, 57% of
all families that participated in the study contributed some of their own money to the
accounts.14 At a few sites, 80-90% of the participants contributed their own money to the
accounts.14 Average savings after three years of participating in the program were
$1,500 per account.14 The impact assessment at the Michigan site had similar results
with average savings of $1,483.14 This site had lower rates of family contributions at
31%.14
One unique aspect of the SEED demonstration was that the programs were all
housed within community organizations.14 Later research that explored the role of
community-based organizations in CSA programs, showed that managing the CSA
financial management.15 Despite this drawback, future involvement of community-based
organizations in CSA programs presents unique opportunities, such as increasing trust
between the community and the program and providing a deeper understanding of the
unique needs of the community.15
Building on the SEED initiative, a large-scale experimental study, SEED OK, was
launched in 2007. The study was conducted as a partnership between the State of
Oklahoma’s Treasurer’s Office, the Department of Health, the Oklahoma College
Savings Plan, CSD and RTI International.16 Drawing from Oklahoma birth records from
April through June and August through October of 2007, 7,115 mothers were selected
to participate in the study.16 African Americans, American Indians, and Hispanics were
oversampled using stratified random sampling. Of those selected, 2,704 participants
agreed to participate in the study and completed the baseline survey.16 After completion
of the baseline survey, which was conducted via telephone, participants were randomly
assigned to treatment (N = 1,358) and control (N = 1,346) groups.16
A baseline survey was administered soon after the mothers gave birth, and a
follow-up survey was conducted in 2011 when the children were approximately four
years old.17 In addition, sixty in-depth interviews were conducted with mothers when
their child was between the age of two and three.17 The CSA program was designed to
be universal, automatic and progressive. To this end, each child in the treatment group
had an OK 529 college savings account automatically opened in their name.17 The
account was seeded with an initial deposit of $1,000 with progressive matches available
also receive a $100 initial deposit if they opened their own OK 529 account for their
child, aside from the account associated with the CSA program.17
A recent summary of the initial findings presents interesting opportunities for
future research. While the full impact of the SEED OK program may not be apparent for
years to come, initial findings demonstrate positive impacts even at the early stages. As
might be expected, treatment children were much more likely than control children to
have a CSA and to have assets in the account than control children.10 What is more
telling is that children in the treatment group were 15 times as likely as children in the
control group to have an individually owned college savings account in their name and
almost 8 times as likely to have savings in this account.10 This is significant because
families cannot save directly into the automatically opened account that is seeded with
the initial deposit.10 Therefore, in order for them to contribute their own savings, they
must open a separate account.10
These findings demonstrate that parents in the treatment group are more likely to
open one of these accounts and to save in this account, despite the fact that the
opportunity to do so is the same for treatment and control groups. Because this
separate account is not linked to the treatment, the likelihood of opening one of these
accounts is the same for treatment and control groups, all other factors aside.
Comparing individual savings contributions between the treatment and control groups is
telling. The total combined individual savings contributions of the treatment group was
$365,578 compared to $59,487 for the control group.10
SEED OK appears to effectively level the playing field in terms of account
likely as their peers to hold an account and to have some assets in that account.10
Given what is known about the impact of simply owning a savings account on future
educational attainment, this finding is significant even if the amount of savings is not
significant. Participation in the program resulted in the treatment group mothers
maintaining or increasing their expectations for their child’s education. Some of the most
significant findings are that the CSA program led to improved social-emotional
development among the child participants, and to decreased depressive symptoms for
the mothers of the participants.10 Furthermore, SEED OK resulted in positive effects on
parenting stress and parenting practices three years after the beginning of the
program.10
In order to measure social-emotional development, researchers administered the
17-item version of the Ages and Stages Questionnaire: Social-Emotional, to both
treatment and control groups at the 3-year follow-up.18 Analysis of the treatment and
control groups indicated no significant differences between the two groups at baseline,
indicating that random assignment was effective in producing similar groups.18 While
demographic and socioeconomic information was collected at baseline, only the
follow-up surveys collected information on the children’s social-emotional development. After
comparing the group means, the results showed lower scores in the treatment group
compared to the control group, indicating improved social-emotional functioning in the
treatment group.18 This effect was greater among treatment participants whose mother
did not have a high school diploma, with a household income of less than 200% of the
that account holding in a CSA program has a greater impact on the social-emotional
development of disadvantaged groups.18
Another outcome measure of SEED OK was maternal depressive symptoms,
measured using the 4-item Center for Epidemiologic Studies Depression Scale (CES-D)
at baseline and follow-up.19 No significant differences were noted between the treatment
and control groups at baseline.19 Similar to the findings from the study of
social-emotional functioning in the children, maternal depressive symptoms were lower among
the treatment group compared to the control group at follow-up, with notable differences
among mothers with lower education and lower income.19 In order to test whether
improved social-emotional development mediates the relationship between CSAs and
reduced maternal depressive symptoms, researchers used a Baron-Kenny mediation
analysis and sensitivity tests.19 Both types of analyses yielded similar results.19 When
applied to the whole sample, mediation effects were marginally significant.19 However,
when the mediation analyses were conducted on four subsamples, the mediation effect
was significant, suggesting that improved social-emotional development in children at
least partially mediates the relationship between CSAs and maternal depressive
symptoms.19
Holding a CSA impacts educational access and outcomes. Research has shown
that college expectations start at a young age and that even in second grade, children
may already have a sense of their future goals as it relates to education.20 Early account
holding impacts children as they begin to formulate expectations around educational
college enrollment and completion that will prepare the next generation to contribute to
the workforce.
Federal Policy
Savings accounts for children are not a new idea but rapid expansion of CSA
programs may increase the political will for CSA policies at the state and national level.
One of the earliest CSA policy proposals was introduced in the Senate (S.2751) by
Senators Rick Santorum (R-PA) and Jon Corzine (D-NJ) in 2004.21,22 An identical bill
(H.R. 4939) was introduced in the House by Representative Ford (D-TN).22 This bill, the
America Saving for Personal Investment, Retirement, and Education (ASPIRE) Act of
2004 would have established a KIDS Account Fund in the Treasury.22 The fund would
be used for the creation of Kids Investment and Development Savings Accounts (KIDS
Accounts) seeded with an initial $500 deposit for every child at birth.22 Families meeting
certain income eligibility criteria would also be eligible for a savings match on their
contributions to the account.22 Account funds could be used for post-secondary
education or first time homeownership.21 While referred to the Committee on Finance,
the bill did not go anywhere.22
Related versions of this bill were subsequently introduced in the 109th, 110th,
and 111th Congress in both chambers. More recently, the American Dream Accounts
Act of 2013, sponsored by Senator Coons (D-DE), was introduced in the Senate during
the 113th Congress, with an identical House bill introduced by Representative Fattah
(D-PA).22 The purpose of this bill was to award grants to entities in order for them to
provide college savings accounts and improve college readiness among low-income
died at the end of the 113th Congress. The American Dream Accounts Act was
reintroduced by Senator Coons and Representative Fattah in the 114th Congress and
has once again been referred to committee.22 It remains to be seen if this bill will be
acted on in the current Congress.
State Policy
Beyond the federal policy proposals, there is no uniform policy model of
children’s savings accounts. In fact, many states utilize legislative advocacy as well as
funding from private donors to launch CSA programs. The first two states to incorporate
statewide CSA programs were Maine, in 2008, and Nevada in 2013.
Maine
Maine has paved the way for other states by being the first to have a statewide
CSA program, catalyzing additional New England states to start their own CSA
programs. As is the case with most CSA programs currently in operation, the CSA
program in Maine known as the Harold Alfond College Challenge, was built on the
existing state 529 college savings plan, the NextGen College Investment Plan.23 This
CSA program was the result of an endowment from the late philanthropist Harold
Alfond, whose foundation is responsible for launching the Harold Alfond College
Challenge.23 The program was launched as a pilot in 2008 and expanded to the whole
state in 2009.23 Families who were residents of Maine and opened a NextGen 529
College Investing Plan account before their child’s first birthday were eligible to receive
a $500 grant to be invested in the account.23
This program was effective in encouraging families to open NextGen 529 College
compared to only 4% of families holding an account prior to the initiation of the
program.23 However, a follow-up study found that in a sample of eligible families, those
who had not enrolled or inquired about the program were more likely to fall in the lowest
education (58%) and income (44%) categories.24 To counteract this finding and to make
the program more inclusive the program model was changed in 2014 to a universal,
automatic, opt-out program where all babies born in Maine will automatically have an
account opened in their name, unless they choose not to participate in the program.23
One caveat to this and other programs is that the account is managed by a third
party, in this case the Alfond Scholarship Foundation, and therefore a family cannot
make contributions directly into the account.23 The family also does not have access to
the account funds.23 In order for a family to contribute to an account, they must open
their own NextGen 529 College Investing Plan account.23 Additional efforts by the
Alfond Scholarship Foundation encourage families to open their own college savings
account.23 A potential policy option would be to streamline state 529 college savings
accounts that are tied to CSA programs so that parents could make direct contributions
into the same account, instead of requiring families to open an additional account.
Account holders are also eligible for matched savings which are funded by fees
charged to national account holders.23 For every dollar contributed, participants are
eligible for a 50% match up to $300 a year with a minimum contribution of $50 to be
eligible.23 Participants can receive a $100 match for having automatic deposits.23
Because there are no income eligibility requirements for receiving these matches, there
is a likelihood of these disproportionately benefiting people who are already
matches can be restructured in a progressive way so that economically disadvantaged
households would be eligible for a larger match.
Two ways that the Harold Alfond College Challenge program made the program
more equitable was to eliminate the account maintenance fees and reduce the minimum
deposit needed to open an account from $250 to $25.23 Other programs have provided
the initial account deposit for economically disadvantaged households.
Continuing to learn from the example of the Harold Alfond College Challenge
program, applications for CSA programs could be incorporated into DHHS applications
for public assistance. A policy was proposed to this end in Maine but was not
successful.23 Another possible policy avenue is to encourage employers to allow for
payroll deductions for CSA accounts. While Maine has not been successful in passing
any policies that would allow for this, some employers now offer this as an option due to
outreach efforts by the Harold Alfond College Challenge.23
Nevada
In 2013, a pilot program was launched in Nevada providing college savings
accounts to over 3,000 children living in thirteen rural counties.25 Additional funding from
Charles Schwab Bank allowed students at some Title I schools in Washoe County to
participate in the pilot program, and Agassi College Preparatory Academy participated
with funding from Meadows Bank.25 Similar to the Harold Alfond College Challenge
program, Nevada College Kick Start, the Nevada program, utilized the state’s existing
529 college savings plan as the infrastructure to launch the CSA program.25 The
program expanded statewide to all public school kindergartners in 2014 and
College Challenge by targeting kindergarten students as opposed to infants and
focusing on children in the public school system.
Funding for the accounts comes from program manager fees received from the
investment firm that runs the 529 plan.26 These fees provide $50 in an SSgA Upromise
529 Plan college savings account, the state 529 plan, for every kindergarten student in
public schools.26 In fact, no taxpayer dollars are used to provide funding for the
accounts.26 There are now over 100,000 Nevada kindergarten and first grade students
participating in the Nevada College Kick Start program.25 The State Treasurer’s Office is
in charge of administering the program and serves as the account owner of the Nevada
College Kick Start accounts.25
Just as with the Harold Alfond College Challenge program, parents and
caregivers cannot contribute directly to this account and must open a separate account
if they wish to save in addition to the Nevada College Kick Start account. Once a child
graduates from a Nevada high school, they are then able to use the account money
towards eligible institutions, including colleges, universities and technical or vocational
schools.26 The student never directly accesses the money as they must submit a form to
request payment for approved expenses.26 The State Treasurer’s Office then distributes
the funds directly to the institution.26
Partnering with the 1:1 Fund, the Nevada College Kick Start program is raising
additional funds to encourage parents of children in Title I schools to open separate 529
college savings accounts for their child.25 Once the funds are raised, families with
children in Title I schools will be eligible for an additional $50 matching grant when they
minimum deposit amount was lowered to $15.27 LMI families are also eligible to
participate in the Silver State Matching Grant program.28 Families with a household
adjusted gross income that is below $75,000 yearly, who are Nevada residents, who
open their own SSgA Upromise 529 Plan college savings account, and whose child is
13 or younger can apply to receive matched funds up to $300 a year with a lifetime limit
of $1,500.28
A concern among some families is that holding assets in a college savings
account will impact their eligibility for public benefits or financial aid. To remove this
potential barrier, the State of Nevada eliminated asset limitations on college savings
accounts for families that receive state or federal benefits.29 The following sections
highlight pilot programs that have been launched in North Carolina as well as policy
recommendations that may serve as the basis for a statewide CSA program.
North Carolina Programs
In January of 2016, Durham Kids Save was launched, the first CSA program in
North Carolina. The program was the result of a partnership between the City of
Durham, Durham Public Schools, East Durham Children’s Initiative (EDCI), a
place-based initiative providing a pipeline of services in a 120-block area, Self-Help Credit
Union and CFED.30 It was piloted at Y. E. Smith Elementary School, located in the EDCI
zone, and all enrolled kindergartners automatically receive an account seeded with
$100.31 Participants are also eligible for a savings match of up to $100 a year through
fifth grade.31 Once a student graduates from high school, they are allowed to use the
education such as college tuition, vocational training, books, fees, and room and
board.31
Another CSA program is scheduled to launch in the fall of 2016 in Reidsville, NC.
This program is unique in that it is only the third CSA program in the US to serve a rural
community.32 Similar to the Durham Kids Save program, this program will utilize a
place-based initiative to provide children in a public housing community with savings
accounts.32 The accounts will be seeded with an initial $100 deposit and matched
savings will be available up to $250 a year through elementary school.32
A third CSA program, also in Durham, recently helped 17 students participating
in Partners for Youth Opportunity (PYO) to save $500 towards postsecondary
education.32 This program was unique because students were encouraged to save a
portion of the money that they earned from a paid internship. For students who saved
$325 or at least 20% of their earnings, the financial partner, the Latino Community
Credit Union, gave a $175 match, to meet the $500 goal. Students saved well beyond
the goal of 20% of their earnings, on average saving 40% of their earnings.32
North Carolina 529 Plan
North Carolina’s 529 college savings plan is administered by a nonprofit, the
College Foundation, Inc.33 Similar to other states, contributions to North Carolina’s 529
college savings accounts are tax-free when the funds are used towards qualified
expenses.33 These include tuition, fees, room and board, books and equipment, such as
a computer.33 Despite the elimination of the state tax deduction for contributions made
to a 529 college savings account in 2014,34 the NC 529 plan is very accessible. The NC
of only $25.33 This makes the NC 529 plan an excellent jumping off point for a statewide
CSA program in North Carolina. Providing a savings account with an initial $50 deposit
for all of the approximately 120,000 babies born every year in North Carolina would cost
the state $6 million and would have an immeasurable impact on child well-being and the
economic growth of the entire state.
Policy Recommendations
The following recommendations are based on lessons learned from existing statewide
CSA programs and include specific recommendations for North Carolina based on the
state infrastructure and policies.
Policy Recommendation 1:
Eliminate asset limitations related to CSA accounts for families that receive
public benefits to encourage savings contributions to the accounts.
Policy Recommendation 2:
Allocate funding to study the programs that are currently being piloted in Durham
and Reidsville to learn about best practices for implementing CSA programs in
urban and rural settings in North Carolina.
Policy Recommendation 3:
Research how program manager fees from the NC state 529 plan are currently
being used to see if a portion of these fees could be used to seed initial deposits
in a state CSA program.
Policy Recommendation 4:
Waive account maintenance fees and provide the $25 initial deposit for
Policy Recommendation 5:
Utilize existing Smart Start partnerships to pilot additional CSA programs,
particularly in Tier 1 counties in North Carolina.
Conclusion
There is no better social investment than to create opportunities for the next
generation of North Carolinians. The economic success of the state depends on having
a skilled workforce that is ready to meet the challenges of today. Implementing CSA
programs and helping families to build assets and invest in their children’s future
education shows a dedication and commitment to the long-term success of the state.
North Carolina has the unique opportunity to build on existing infrastructure and to learn
from and expand on the CSA programs that are currently being piloted. Given the many
ways that North Carolina has paved the way in promoting the well-being of its children,
it can continue to be a leader in its commitment to children by implementing CSA
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