Proposed Bills Expand College Savings Opportunities
Imagine if every child in Texas had a college savings account. Imagine the peace of mind and confidence that accumulated savings in this account would give to students as they make the transition to college. Representative Marsha Farney’s HB 3987, which is being considered by the House Public Education committee today, and Senator Sylvia Garcia’s SB 1858 would get us closer to making this vision a reality.
There are many reasons why their legislation allowing schools to connect students and families with college savings accounts through partnerships with financial institutions is a positive step for our students and for the Texas economy. The program this legislation supports would:
- Help develop financial skills through experiential learning: Students will practice saving in their own account while learning about money management in school as part of Texas’ financial education curriculum. This will help students develop positive financial habits that are important to their future financial security.
- Provide dual-generation benefits: Both parents and students are empowered to save and plan for the future together through this initiative.
- Help students cover their unmet financial need: In Texas, many students at public colleges and universities have some level of unmet need — the gap between the total cost of attendance and all sources of student aid available to the student, including grants, loans, and the family’s expected contribution. Texas students at public four-year institutions face an average unmet need of $5,639.[i] To fill this financial gap, students need to work while in school or obtain higher-cost private loans. The only reliable alternative is to build savings for college, which should begin as early as possible to be effective.
- Creates a college-bound culture: Research has found that students are three times more likely to go to college with as little as $500 in college savings.[ii]
While many schools already offer in-school savings programs, they generally do not offer them in conjunction with their financial education curriculum, which this legislation would enable. To encourage program participation, this legislation also extends some of the existing protections already in place for Texas’ 529 college savings accounts. These include exempting savings from the eligibility criteria for Texas need-based financial aid or public benefits.
Alongside this legislation, OpportunityTexas, CPPP’s joint initiative with RAISE Texas, is conducting a pilot program to help refine the program this bill supports. Our ultimate goal is to scale this initiative and ensure that every Texas student will have the opportunity to open a college savings account at school.
For more information about OpportunityTexas’ youth savings work, see this blog post.
[i] THECB, Report on Student Financial Aid in Higher Education for Fiscal Year 2013, page 17.
[ii] Assets and Education Initiative. (2013). Building Expectations, Delivering Results: Asset-Based Financial Aid and the Future of Higher Education. In W. Elliott (Ed.), Biannual report on the assets and education field. Lawrence, KS: Assets and Education Initiative (AEDI).
CPPP’s Economic Opportunity Intern Jane Santa Cruz contributed to this post.