Maine program brightens college prospects – at birth
Foundation offers $500 grants to all newborns – provided their parents open a college-savings account.
Just a few days into the new year, Laurie and Keenan Farwell welcomed their daughter Hadley into the world. The hospital staff at MaineGeneral Health in Augusta had the pleasure of delivering not just the baby, but also her first birthday gift: $500 toward her future education.Skip to next paragraph
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Hadley is a beneficiary of the new Harold Alfond College Challenge, a first-in-the nation philanthropic program that will give families statewide a $500 starter grant – and assistance with paperwork – to set up 529 college savings accounts for infants.
"It was very exciting to think she's not even a couple hours old, and she's already looking at her college fund," Ms. Farwell said in a phone interview as Hadley patiently sucked on her tiny hand, awaiting a feeding.
Harold Alfond founded Dexter Shoe Co. in Maine in 1958 and shared millions of dollars to promote health and education in the state. After giving many scholarships to college-age students, "he wanted to help build aspirations for college at the front end of life," says Greg Powell, chairman of the board of the Harold Alfond Foundation. Mr. Alfond laid the groundwork for this legacy before he died in November.
While elite colleges have moved recently to replace loans with grants, the high cost of college is still a barrier to many families. As efforts continue to rein in those costs, the Maine scholarship is a creative way to address the other side of the college-debt problem – the dearth of long-range savings.
Other states will be watching the outcome as they look to encourage more participation in their 529 plans, named after a section of the Internal Revenue Code that allows such deposits to grow tax-free. Some groups are even hoping that states or the federal government will consider creating broader child savings accounts that could be used by the beneficiary for any purpose once he or she turns 18.
"It's about changing savings patterns and financial literacy," says Lisa Mensah, executive director of the Initiative on Financial Security at The Aspen Institute, a supporter of child savings accounts. "The power is not the first $500, but how individual kids and their families save over their life."
Maine has traditionally employed many people in industries related to natural resources – everything from fish to blueberries. But as the economy changes, the demand grows for workers with college degrees. About 57 percent of Maine's high school graduates enroll immediately in college, according to the Maine Compact for Higher Education. Nationally, only one-third of parents with middle-school students have started saving for college, the Institute for Higher Education Policy reports.
"Our challenge is changing the culture ... and giving some kind of incentive that says even a little bit you save today will help reduce college debt later," says Karen Vigue, the college savings officer with Maine's NextGen College Investing Plan, the state's 529 system. About 8,000 Maine residents have opened NextGen accounts since the plan started in 1999. That's low participation considering that about 14,000 babies are born in Maine each year.