In 2009, when President Obama proposed that by 2020 our nation would have the highest proportion of college graduates in the world, the Department of Education set our agenda to that goal. Secretary Duncan calls it “our North Star.”
The promise of reaching the President’s goal is being aided by a new proposal from ED called the College Savings Account Research Demonstration Project. Sharing program design and implementation responsibility with states, philanthropies, nonprofit organizations and researchers, the U.S. Department of Education will make $8.7 million available to finance college savings accounts for 10,000 low-income middle school and high school students who participate in the Gaining Early Awareness and Readiness for Undergraduate Programs (GEAR UP) initiative. Congress already has provided the necessary funding, and we plan to make awards by September 30 of this year.
We’re proposing that each eligible student receive $200 to start a college savings account that each participating state will open automatically and hold in trust for its students. We further propose that students have the opportunity to earn an extra $120 a year in a dollar-for-dollar savings match program over each of the next four years.
Ultimately, students would have $1,160 in matched savings for college expenses after they graduate with a high school diploma ($200 + $480 +$480 = $1,160). When they enroll in college and start classes, those savings will be available for textbooks and other educational expenses.
We proposed to do this as part of GEAR UP because we believe that college savings accounts for low-income youth are apt to work best when coupled with the type of academic preparation and college counseling, including financial counseling, that GEAR UP provides.
At a recent discussion at the New America Foundation on the importance of saving for college, one of the key questions raised was, “will $1,160 make a difference, given how much college costs?’
There’s a good amount of evidence that savings accounts help youth and families gain financial literacy knowledge and skills and acquire positive attitudes and behaviors about saving for and attending college. Initial research suggests that students with a savings account, even with one with a small balance, are much more likely to enroll in college than students without one.
A recent study by Elliott and Beverly about the effect of college savings on the college progress of young Americans, published in the American Journal of Education, reported that “17-23 year-old children who have savings are approximately twice as likely to be on course [in completing college] as their peers without savings of their own.”
While the evidence is positive, we want to be sure that savings accounts make a difference. The Institute of Education Sciences of the U.S. Department of Education will study of the impact of this project on increasing college readiness, higher education enrollment, and ultimately graduation.
Research associated with this project could help us unpack the significance of students having the financial capability to go to college and how that could positively affect student “college-going” aspirations and behavior, before, during and after college. We simply must do better as a nation and use every tool at our disposal to change these facts.
For more information on GEAR UP and this exciting project, including a copy of the Notice of Proposed Priorities, please visit here. Over the next 30 days, we’re inviting comment on the design of this project. It’s a test. We want it to be well-designed. We want your input.
Martha Kanter is the Under Secretary of the U.S. Department of Education.