College Savings Initiative aims to advance college success for all families

The New America Foundation and Center for Social Development (CSD) at Washington University announced May 21 a new College Savings Initiative to examine and improve 529 college savings plans so more people have the opportunity to attend and complete college.

“This initiative couldn’t be more timely,” said Ray Boshara, vice president of domestic policy programs at New America. “Vice President Biden recently said the Obama administration was committed to improving 529s to help achieve college affordability and completion, and President Obama has called for Americans to ‘move from an era of borrow and spend to one where we save and invest.'”

State-sponsored 529 college savings plans were established to encourage families to save money for postsecondary education. Money contributed to these plans grows free from federal and state taxes, and contributions are tax-deductible in most states.

Unfortunately, 529s have yet to reach their full potential for low- and moderate-income families who have the most difficulty saving for their children’s education. In other words, those who face the most barriers to sending their children to college receive the fewest 529 benefits.

“Saving money is not easy, but research shows many people can save when they have incentives and a way to do so,” said Margaret Clancy, policy director at CSD. “More low-income families may save with well-designed 529s and incentives. We will study 529 innovations to see which ones are effective. This will inform 529 policy so that it can benefit families of all income levels.”

“I’ve learned that if families are not preparing for college financially, then they’re probably not preparing in other ways as well,” said Jacqueline T. Williams, director of the College Savings Initiative at New America. “That’s one of the reasons 529s are exciting — they focus both the mind and money on college.”

“Research indicates that saving and asset holding are associated with educational achievement,” said Michael Sherraden, Ph.D., the Benjamin E. Youngdahl Professor of Social Development and director of CSD. “There is evidence that savings for college may focus attention of parents and children on postsecondary education, affecting their outlook, orientation, course selection, discipline and academic achievement.”

Some states have established programs to better include lower- and moderate-income families in 529 plans — including outreach, initial deposits, matching deposits, low fees and setting up 529s at birth. In Maine, a philanthropist has bequeathed money to set up a 529 plan for every newborn.

“Structured and invested properly, 529s hold enormous, untapped potential to get more students, especially those least likely headed to college, on a path to attend and complete college,” Boshara said.

The College Savings Initiative will examine a number of new ideas, including how 529s might connect to federal tax and student aid policies. The initiative also will study the potential to automatically open a 529 for every child when they enroll in kindergarten, to enable them to save and think about college from an early age.

“In the United Kingdom, all children now start their lives with a savings account in the Child Trust Fund,” Sherraden said. “If college savings research continues to be promising, perhaps the United States will consider a similar policy.”

For more information on the initiative, visit