Congress: Don't squander America's big investment opportunity
Earning a college education benefits families and the economy for generations. Unfortunately, students from low-income homes are earning degrees at the lowest rate in three decades. Washington needs to cash in their economic potential by helping them save for college.
(Page 2 of 2)
In Texas, for instance, the Supplemental Nutrition Assistance Program (SNAP) – formerly food stamps– Medicaid, and Temporary Assistance for Needy Families (TANF) each have different asset limits, ranging from $1,000 to $5,000. A family with $4,000 in savings could receive SNAP benefits but not TANF or Medicaid benefits. The family is then faced with the choice of either having to forego the immediate assistance they need or spend down the balance of their savings, making them more vulnerable in the long run. Removing these disincentives is a necessary first step.Skip to next paragraph
Subscribe Today to the Monitor
The US also needs to help kids themselves build savings by making sure that every child has access to a college savings account, one with his or her name on it. Versions of this approach have been implemented in recent years at the state and local level, including in North Dakota, Maine, and San Francisco.
Ultimately, however, only a federal policy can reach every child. The ASPIRE Act, introduced in previous Congresses with bipartisan support, provides a model for implementing this approach on a national scale.
At birth, a savings account would be set up for each child and seeded with an initial deposit. Since the account would be issued to all children, this policy would circumvent barriers to account ownership that low-income families traditionally face. Matching contributions for children living in households earning below national median income would provide an additional savings boost. At age 18, students could use the accounts for college as well as other purposes.
This represents just one way that policy could expand savings, and consequentially educational opportunities for low-income students. Helping families save and build assets is already a national priority. In fact, the federal government expects to dedicate almost $520 billion this year for that purpose. These incentives, however, come primarily through the tax code as exemptions, deductions, and credits that never reach the low-income families for whom they would have the greatest impact. A policy like ASPIRE would help to close this gap.
In the wrangling over the budget deficit, “investments” have been labeled euphemisms for “spending.” But the advantages to connecting poor children with a college degree are clear. College educated Americans have increased economic mobility in addition to greater financial security. A recent study found that only 16 percent of Americans born in the bottom income quintile who earn a college degree stay at the bottom, compared to 45 percent of those without.
Over the long run, helping poor kids save for college gives Americans the greatest bang for their buck. Euphemism or no, that’s the kind of opportunity a savvy investor would jump at.
Rachel Black is a policy analyst in the Asset Building Program at the New America Foundation.