Event Summary: Saving Financial Aid

Today, the Asset Building Program co-hosted an event with the Assets and Education Initiative (AEDI) at the University of Kansas. The event focused on new research on the issue of children's savings for college and how policy can better help low- and middle-income students both get to college and stay enrolled. The research from the field is clear: having a savings account in a child's own name has a positive impact that is sustained even when controlling for family income, educational background and other important factors. A new AEDI report Building Assets, Delivering Results: Asset-based Financial aid and The Future of Higher Education was released at the event and is available now for download. We've done something new for this event and summarized the conversation in a Storify. Check it out here, or scroll to the bottom of this post to read it.

Rosemary Byrnes of the Citi Foundation introduced the report by citing the myriad challenges that low-income students face in accessing college and the need for rigorous research and demonstration projects to deliver meaningful solutions to improve the number of children able to secure a college credential. 

William Elliott framed this conversation in light of the recent conversation over the rise in student loan rates. While loans continue to be an important part of the puzzle, Elliott argues that refocusing the conversation on savings would help to reduce the overreliance on borrowing and provide an early intervention that keeps the path to a college education open. He argued that even modest levels of monthly savings, as low at $23, on the part of families could significantly mitigate the need for heavy debt loads. Combining CSAs with the existing set of financial aid options, suggested Elliott, would help the public get a greater return on its investment in support of policies that facilitate college achievement.

Melinda Lewis, policy director with AEDI, pointed out the degree to which current asset building policy in the U.S. skews benefits up the economic ladder. Children's savings accounts (or CSAs) are one way to correct this imbalance. Lewis identified several key features that she views as critical to the success of any CSA program, such as enrolling children automatically in the accounts, ideally at birth.

Following Melinda Lewis and William Elliott's remarks, a panel of experts (moderated by Asset Building Program senior policy analyst, Rachel Black). Dana Goldstein, a journalist and Bernard Schwartz Fellow at New America, discussed her work reporting on students' varied journeys to college. She profiled two students who had each overcome challenging social and economic circumstances and pointed to the role that aspirations and institutional support played in each of their paths. Goldstein argues that savings alone are not enough - rather, savings must be part of a comprehensive strategy to support students that also includes thoughtful education around financial aid options, college choices, student loans, and money management skills.

Michael McPherson, the President of the Spencer Foundation and a co-author of a College Board report, Rethinking Pell Grants, spoke next about the role the Pell program and more robust investment in it could play in improving the college finance landscape for lower-income students. He worries that some students and their families are simply unable to save, limiting the benefit of CSAs. Finally, Ben Miller, a senior policy analyst with New America's Education Program, offered his thoughts on savings as a viable option to fund college for low-income students. Miller sees significant challenges in adequately funding a savings program for low-income students at the federal level, where there is already considerable financial pressure on the Pell program. He agrees that the structure of Pell at present is not conducive to supporting the aspirations of younger students. Miller points out that students don't know if they'll even be eligible for a Pell grant until the spring of senior year of high school - well after the deadlines for admissions at many four year colleges. CSAs, then, could be a valuable pre-commitment device that sends the message early that college is a realistic pursuit.

The panel engaged with several members of the audience for questions, including Andrea Levere, President at CFED. Levere's connected the college savings conversation to broader issues of financial inclusion. In her response, Lewis added that engagement with mainstream financial institutions may help low-income students to be more savvy consumers as they make choices about where to attend college, what loan products to use, and in life after higher education. Jamaal Abdul-Alim, a reporter from Diverse Issues in Higher Education, asked the panelists to comment on the restrictions placed on funds saved in children's savings accounts. Elliott explained that, traditionally-speaking, CSAs are restricted only to higher education after a child reaches age 18. However, he also noted that other countries have created alternative structures - for example, Singapore has a "multi-tiered" system that allows withdrawals for other purposes. Lewis pointed out that wealthier families can and do make poor financial decisions too - however, these families are better able to rebound from such an event while lower-income families have a much lower margin of error. Ultimately, democratizing access to college savings is a policy strategy that improves equity and increases educational and therefore economic opportunity for young people.

Check out our Storify with tweets, photos and other reactions from the event below. Also, watch an interview with Building Expectations, Delivering Results author William Elliott here.