College Savings Accounts Aren’t Just About the Money

Missouri's treasurer says 529 programs are only one piece of the college puzzle.
by | April 14, 2016

Every summer, staff at the nonprofit Scholarship Foundation of St. Louis spends the majority of their time in painful conversations with low-income families whose oldest child has been accepted to a college they can’t afford. The families bring their financial aid offers to these meetings with the hopes that the foundation will help them find a way to make it work.

But what they often learn, says Faith Sandler, the foundation’s executive director, is that paying back the loan would strain them to the breaking point. It’s crushing news. The Scholarship Foundation, she says, can’t “award to a needy student if that’s the kind of situation we’re contributing to. It’s a really difficult position for us to be in.”

That’s why the foundation jumped at a chance to partner with Missouri when it began offering matching grants in 2011 to lower-income families that start an account in MOST, the state's 529 college savings plan. The foundation set up and began contributing money to savings accounts for needy eighth graders. The idea wasn’t necessarily to significantly offset the cost of college for those kids, but was to set their families’ expectations and get them to start planning. “I think what we really want to do is to try and have smarter conversations earlier so we can avoid those horrible moments,” Sandler says.

The lower-income match program for MOST started at a time when many cities and states were looking at ways to encourage families to save for college. San Francisco, for example, targeted kindergarteners, opening up and contributing $50 to a college savings account for every kid entering the public school system. The movement was spawned from research, much of it by Washington University in St. Louis, which found that if children know their family is saving for college, then they might be more motivated to attend.

But what Missouri Treasurer Clint Zweifel found after starting the match program was that setting up the account was only part of the picture. “Research says the accounts matter,” says Zweifel, “I believe that, but I don’t think that’s enough. We need a program where there’s something more underneath the hood than simply the promise of an account.”

 

Other organizations have partnered with the state’s 529 program to provide the additional support lower-income kids need to get in and stay in college. Wells Fargo Advisors and the United Way of Greater St. Louis, for instance, created matching grant programs that also provide families with financial advice on things like budgeting, saving and investing for education.

The Scholarship Foundation’s web of support for its students is perhaps the most involved. It provides tutoring services, mentoring and college guidance from eighth grade through the second year of college. In high school, when participating students meet certain benchmarks for things like attendance and grades, the foundation deposits more money their savings account.

All told, the efforts are helping 1,400 lower-income families in the St. Louis area and Zweifel predicts the idea will catch on in other areas across the state. The programs won’t necessarily build extensive savings for students. Kids in the Scholarship Foundation’s program, for example, will probably have about $2,000 in their accounts upon graduating high school (unless their families make additional deposits).

But money isn’t the whole point, says Sandler. It’s one piece –albeit a key piece -- in a college prep toolkit. “We see it as strongest tool to begin working with students and families to ensure they make the best transition possible.”