Savings Accounts: One Small Step for Young People, One Giant Leap towards College

For many young people, college may seem like a desirable yet elusive goal: clearly understood as a step toward economic mobility but believed to be unaffordable and otherwise unattainable. Even young people who expect to go to college–those who are both certain and likely to attend college–do not actually attend after graduating from high school. This gap between expectations and attendance is what has been referred to as wilt–when young people’s developed expectations do not have the opportunity to blossom into college attendance.

William Elliott, PhD, Assistant Professor at the University of Kansas and a Senior Research Fellow here at New America Foundation, coined this term in a recent longitudinal study that examined college attendance for young people who expected to attend college. In five year’s time between ages 15 and 20, an estimated 32% of young people experienced wilt, and those who were Black, male, living in unmarried households, or whose parents had lower levels of education experienced wilt more often than their counterparts.

One noteworthy finding from this study is the significant relationship between savings accounts and college attendance, even after taking into consideration things like household income and net worth. Among young people who expected to attend college, those who had savings accounts in local banks were over seven times more likely to attend college after graduating from high school compared to those without any savings accounts. Young people who had a portion of their savings designated specifically for college were almost four times more likely to attend college.

You might ask, “Once they are there, what about keeping them in college and helping them move towards graduation?” Elliott is looking at this, too. In a separate longitudinal study of young people ages 17 to 23, 57% were on course, meaning that they were either enrolled in or had graduated from college. After taking into consideration things like household income and net worth and young people’s expectations, those who had a portion of their savings designated specifically for college were almost twice as likely to be on course compared to those without any savings accounts.

Commentary on this research points out that–of all the things we can do to help young people make that giant leap towards college attendance and graduation–opening savings accounts in young people’s names is a pretty small, feasible step with the potential to significantly improve outcomes. The Asset Building Program has been working on making this small step a reality by advocating for policies supportive of young people’s savings. One example is the ASPIRE Act, which has been proposed  to provide all young people in the U.S. with savings accounts in their names to save for things like college. Other examples include Young Savers Accounts, 401Kids, Baby Bonds, and 529 College Savings Plans. We are still learning about the relationship between savings accounts and college attendance and graduation. However, studies that find support for this relationship may provide the compelling evidence needed to bring the ASPIRE Act and related policies to scale at the national level.