Last week, the US Department of Education (ED) announced plans to pursue a College Savings Account Demonstration project, which will be implemented within the GEAR UP Program and designed to expand the policy toolbox to get more high school graduates to and through college.
GEAR UP is an existing program that focuses on promoting college readiness for lower-income students. It provides resources for academic and related support services and in recent years has been funded at over $300 million a year.
The proposed demosntration project will provide 10,000 high school students with savings accounts as well as financial education counseling and will also deploy a rigorous, randomized control design to test the impact of the intervention. This will allow the demonstration to inform strategies at the federal, state and local level.
Previously, we have highlighted research that suggests students with savings accounts are much more likely to enroll in college than students without accounts. Based on this work, Secretary of Education Arne Duncan joined the FDIC and the national Credit Union Administration in a commitment to increase the number of students with savings accounts. With this announced Demonstration, ED is making good on this commitment. Secreatary Duncan and his colleagues at ED see this as a key strategy for helping the country meet its ambitious college completion goals. By 2020, the US aims to have the most comptitive workforce in the world, as measued by the proportion of colelge graduates over the next decade.
Under the proposed Notice published last week, each participating student will receive $200 in seed funding to start the account, which the state will open automatically. Students will have an opportunity to earn an extra $10 per month in a dollar-for-dollar savings match program over the next four years. This will mean a student can save over $1,000 by the time they are ready for college.
ED will initially allocate $8.7 million worth of funds that are already appropriated to support the demonstration, and devote more to the multi-year research evaluation. Although the Notice is not final, I believe at least the following States are eligible: Arizona, California, Connecticut, Idaho, Kentucky, Montana, Nevada, North Carolina, South Carolina, South Dakota, Tennessee, Texas, and Washington.
At this point, ED is inviting feedback on their proposal. Comments are due by June 30th and a final Notice will describe the application process for states interested in competing to participate.
I would like to see a substantial amount of competition for these funds, which means that eligible states should begin preparing innovative proposals. I expect states will need support in forging the partnerships that are necessary to implement the intervention. And I suspect there will be real opportunities to work with them so they are able to incorporate the many learnings which have accumulated over the years in the asset building field into their proposals.
This is an exciting and large-scale effort, with the potential to engage many people, organizations, and policymakers. And best yet, it should be a positive experience for thousands of high school students around the country as they set their sights on college success.