Focused on college affordability, policymakers across the nation are launching programs that encourage families to begin saving for higher education when their children are young. Education Dive reports that states like Colorado, Massachusetts, and Illinois are offering small amounts of seed money—typically $50–$100—to parents who set up 529 college savings accounts, funds that allow college savings to grow tax-free.
Colorado hopes to encourage early start
As of the new year, children born or adopted in Colorado are eligible to receive $100 in their 529 college savings account. Officials anticipate that participation will range anywhere from 2.5 percent to 52.5 percent of births and note that 529 savings can be used not only for four-year programs but also for vocational training, graduate programs, and community college.
Although the amount seems meager compared to the high cost of college, proponents of the new initiative say the point is to start somewhere. “It really can be life-changing,” Angela Baier, chief executive officer of the state-run college savings program, CollegeInvest, told the Colorado Sun.
According to Baier, the Colorado Fiscal Institute has shown that children who know they have a savings account in their name are three times more likely to attend college and four times more likely to graduate than peers who do not. Research also indicates that families are also more likely to be able to afford to send their child to college by putting money toward a 529 college savings account early.
States and cities across U.S. launching similar efforts
Meanwhile, the city of St. Paul, Minnesota has begun a program that gives children born a resident of the city $50 toward a college savings account. Children born or adopted in Massachusetts now can receive $50 toward college savings, as well. And looking ahead, Illinois plans to launch its $50 529 contribution next year.
Education Dive notes that while most states now offer 529 plans, it’s too early to gauge their success. Moreover, participation varies widely, with some critics asserting that the plans primarily benefit wealthy families.