The rising cost of education and the impact student loan debt has on youth and families can stunt a person’s buying power significantly over time. Financial insecurity delays the purchasing of homes and pushes more parents to take on their children’s education debt—increasing their own financial instability further.
But local leaders can help residents within their community save to advance their own or their children’s education by:
- Informing their residents about 529 college savings plans and their benefits, and match dollars that they might be eligible for;
- Providing municipal workers with the option to make payroll deductions into 529 accounts; and
- Launching a Children’s Savings Account (CSA) program in their community.
529 plans allow individuals to save for college and generally offer two types of plans: prepaid tuition plans and education savings plans. The education savings plan lets the saver open an investment account for qualified higher education expenses.
Creating a program that uses a 529 program to help residents save for post-high-school education, like children’s savings accounts, or making sure that residents know about 529 programs broadly increases the use of a financial product that will support the educational growth and increase the financial success of a community.
Seven 529 account programs throughout the country provide targeted incentives for savers. For example, Louisiana matches a percentage of the deposits made to an account during the calendar year based upon the account owner’s previous year federal adjusted gross income. This year Louisiana will match up to 14% of deposits with what they call Earnings Enhancements.
In Maryland, the 529’s Save4College State Contribution Program provides families who make less than $75,000 with $500 in their account from the state after investing $25. For households that earn less than $175,000, the state matches their $250 contribution into their account. Many CSA programs use 529 accounts as their investment vehicle and provide incentives to help children, especially low-income children, build dedicated savings for education after high school.
Communities understand that just having access to accounts is not enough, so they are using college savings accounts to build a longer-term college-bound identity for their youth. Columbia, S.C. launched a program that supports saving for college starting with kindergarteners. Columbia Kids $ave is currently in its pilot phase and is one of many local programs throughout the country that have been created to support saving for post-high-school education.
Municipal workforce development success and long-term financial viability require skilled workers who have the credentials that employers need. Local leaders can help stabilize the financial futures of families and of the municipality’s finances too because the economic health of communities depends on the financial health and stability of their residents.
May 29 is National 529 College Savings Plan Day and on that day 529 college savings plans have various sweepstakes, contests, and incentives in the hopes of driving up participation.
About the Author: Patrick Hain is a principal associate for financial empowerment in NLC’s Institute for Youth, Education, and Families.