Community Counts: Activating All Families To Save for Higher Education
In the face of a constant barrage of messages about the skyrocketing costs of college, Indiana families are hearing a new message: Every little bit helps. Promise Indiana (the Promise), a grass-roots effort that began in Wabash County and is expanding to counties around the state, is dedicated to moving the needle on families saving and youth pursuing education beyond high school.
The Promise began with a belief that all families should be empowered to save and that a community can rally together to counter the messages that the size of the account balance is what matters. For families, particularly low- and moderate-income (LMI) families or those whose children will be first-generation college students, this shift in mindset is critical to build the belief that college is attainable.
A dedicated account for educational savings (e.g., College Choice 529 Direct savings accounts) fosters a child's development of an identity that "I am someone who goes to college." LMI youth with an account are three times more likely to attend college than similar youth who do not have an account.1 Even small balances matter. LMI youth with 529 accounts with a balance of $1 to $499 are four times more likely to graduate from college than similar youth without an account.1
The Promise engages entire communities to surround kids with a message that increases hope: "Adults believe in me and are saving for me." Community foundations, schools, faith communities, YMCAs and youth-serving agencies, service clubs, economic development groups, institutions of higher education, businesses and local governments all participate in the Promise by providing funds to match monies youth raise for their accounts. Community members champion students early in their schooling by encouraging them and contributing to their accounts—even if it's just $5.29.
Through grass-roots efforts, the Promise is increasing saving in communities around Indiana, a state where only 11.7 percent of youth under the age of 18 have a 529 account.2 Given the positive outcomes associated with educational savings, as well as the ways it contributes to a child's identity and likelihood to pursue education beyond high school, the opportunity to make an impact by increasing the number of youth who have these accounts is enormous.
The Promise puts intentional systems in place so families can become their own solution. Promise communities partner with local schools to integrate 529 enrollment during registration events, right alongside signing up for the bus or school lunch. Each family that opens an account receives an initial $25 investment from an enrollment sponsor, along with the opportunity to receive an additional community match of $75 by raising their own contributions from their champions. To date, the Promise has helped 3,249 youth in four Indiana counties establish a 529 account.
The ease of signing up at school removes some of the biggest barriers for families—lack of time, lack of access to a reliable internet connection or a computer, and simply putting savings at the bottom of a long list of things to do to help their child be successful. At the school events, teachers and school staff can reinforce the message that every child has a bright future and families should be looking forward to the day when their elementary student will head off to college. The Promise helps increase awareness of 529 accounts and, more importantly, the benefits of families taking action to save.
Families with an annual household income of more than $100,000 were far more likely to be aware of a 529 plan prior to the Promise (78.62 percent). Yet of that same group, only about half were using a 529 account to save for their child's higher education. Moderate- and low-income families were less likely to have heard of a 529 prior to the Promise (37.34 percent and 20.81 percent of families, respectively), and they were even less likely than their higher-income peers to be using a 529 to save (only 2.5 percent of low-income families and 9.9 percent of moderate-income respondents).
As a result of the Promise, low-income respondents were 10 times more likely to be saving using a 529; moderate-income families were four times more likely to be saving. Even the higher-income group saw a boost in 529s as a result of the Promise—an increase from 38.62 percent to 62.72 percent. So far, the Promise has generated more than $581,819 in savings for higher education.
There is power in a community coming together to spread the message that families can save, and that even small amounts matter. Contextualizing 529 accounts, which may be foreign, in a familiar process (e.g., registering a child for school) helps families move to action. Of those aware of 529s prior to the Promise, only 8.89 percent reported they had heard of them through their child's school. As a result of the Promise, that increased to 70.93 percent.
College savings accounts can be a powerful tool for families of all income levels, and they are key for helping youth build a college-bound identity. Bringing an entire community together to champion saving can move families to take that all-important first step.
- Building Expectations, Delivering Results: Asset-Based Financial Aid and the Future of Higher Education (2013). The University of Kansas School of Social Welfare, Assets & Education Initiative. [back to text]
- College Choice 529 (2014). [back to text]
Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.
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