Washtenaw County seeks to plant seeds for college with children’s savings accounts

ANN ARBOR, MI — Washtenaw County officials hope to use college savings accounts as a tool to address generational poverty and empower low-income families.

Before becoming Washtenaw County commissioner, Justin Hodge, who is leading the effort, saw the value of children’s savings accounts as a way for some families to take the possibility of a post-secondary education seriously.

Hodge calls the work “my baby” and says he’s proud the county was able to make it a reality by focusing on fairness.

“If they’ve had this kind of account since they were really young, by the time they graduate from high school – even if there’s not a ton of money in the account – they’re still many times more likely to go to post-secondary because of the account interaction and their development of the mindset that they’re saving for something after high school,” Hodge said.

With the first set of funds for savings accounts due to be deposited around December 2022 or January 2023, the equity component of the accounts will provide children from low-income families with significantly more start-up funding than those whose families have higher incomes. higher.

About 2,300 children attending Washtenaw County Public Schools in grades one and five will have college savings accounts opened in their names this winter. All students who qualify for a free reduced lunch will have $500 invested in their 529 accounts, while all other students will have accounts starting at a minimum of $25.

The model is also intended for savings accounts to have a greater impact on school districts such as Ypsilanti Community Schools, Lincoln Consolidated Schools, and Whitmore Lake Public Schools, which overlap with access lower to opportunity areas on the Washtenaw County Opportunity Index.

The accounts are funded by $2.9 million in American Rescue Plan Act (ARPA) dollars. The Washtenaw County government has made an additional $3.78 million available from its general fund to support the program over the next three to four years, incorporating two new classes of students each year in hopes of having a cohort from grades 1 to 8.

The County Office of Community Economic Development is working with the Washtenaw County Middle School District to establish a Community Advisory Committee that will establish direction, policies and procedures for the program. WISD is also in the process of recruiting two grant-funded positions to coordinate oversight of the children’s savings account program.

In recent years, programs to enroll children in savings account programs have been implemented in different versions at the city and state levels across the country, including programs in Pennsylvania, Nebraska and Maine who sign up and deposit money in 529 savings accounts.

William Elliott, professor of social work at the University of Michigan and senior researcher on college savings accounts, said children’s savings accounts plant a seed of institutional structure for families to start thinking and talking. from college with their children.

from Elliott research on children’s savings accounts shows that children who have accounts designated for school – even when the amount is $500 or less – are three times more likely to enroll in college than children without an account.

“We have a good amount of evidence that shows that when these accounts are in place, children and families will talk more about the child’s future and talk more about their post-secondary education,” Elliott said. “It’s very important to them because they feel that college, which is a long way off for a lot of them, is something you need to act on now.”

Washtenaw County Board Chair Sue Shink said by providing increased financial support to students whose families have lower incomes, the county is bringing its equity priorities to the fore.

“He tells students in our community, ‘We believe in you and we hope you’ll be able to do this and we’ll work to support you along the way,” Shink said. “So we still have work to do. do – creating these accounts is not the last step.”

How will it work

With funds due to be deposited into accounts for children in grades 1 and 5 by the end of the year, enrolling these students costs approximately $1.2 million. In each successive year, another cohort of children in grades 1 and 5 will automatically be enrolled in accounts until it includes a group of students in grades 1-8. Students attending public schools are automatically enrolled and can only withdraw from the program.

WISD grants coordinator Sarah Hierman said the district created a program coordinator position to identify and eventually work with an advisory committee to set direction for the program, including its goals, policies and procedures. The committee could include students, parents, teachers, principals, and county and WISD representatives, among others.

The coordinator, who is funded by a grant for three years, will also have a role to play in making the children’s savings account program sustainable beyond the initial cohort by building partnerships that will allow it to be a program continued.

The goal is to raise college expectations and the number of students completing post-secondary programs, bring parents into the financial mainstream, and increase resources for high-poverty school districts.

“In general, this type of program really opens a lot of doors for students who may not have realized post-secondary education was an option for them,” Hierman said. “We know that university fees are steadily increasing year on year, and year after year there seems to be a growing gap in what students can afford, which plays very strongly into their decision whether or not to pursue post-secondary studies. .”

WISD is in the process of setting up accounts with the Michigan Education Savings Program (MESP), Michigan’s top 529 college savings plan available federally with state tax benefits. Accounts will be managed by TIAA.

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Hodge’s overarching vision is one of equity-centered decision-making. The county’s Board of Commissioners voted to use the Opportunity Index, created by the county and the University of Michigan’s Poverty Solutions Initiative, to make programmatic policy decisions that guide investments County.

Hodge said that with the potential for future ARPA dollars to be spent at the county level on things like a new financial equity center and a down payment assistance program, there is evidence that equity is at the heart of county decision-making.

“This, I think, is one piece of the larger tapestry of financial empowerment-focused services that I hope we will provide to the county,” Hodge said. “It’s a program that’s taken us a long time to put in place, but I think it’s one that I think will lead to transformative change in the county. We really wanted it to be as easy as possible for families and students to have these accounts. The main thing for us was that we make it an equity driver and that’s why we wanted our students who get free or reduced lunch to get an investment also important.

Elliott said there are exciting possibilities for the program, improving both financial and psychological outcomes for low-income students and families while making accounts a topic of classroom discussion.

“It’s important for accounts to be progressive to narrow the wealth gap when it comes to paying for college,” Elliott said. “These accounts will help to do that in a structural way, but also, children and families understand that these are accounts that not only they can save on, but also their family members.”

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