Photo Courtesy of Edwin Torres/Mayoral Photography Office
Mayor de Blasio recently helped announce the Child Savings Account initiative.
By Forum Staff
Saving for college just got easier for 10,000 New York City public school children thanks to a partnership between the city, NYC Kids RISE, and the Gray Foundation after they launched the NYC’s Child Savings Account (CSA) initiative.
With up to $10 million in seed funding contributed by the Gray Foundation, and working in collaboration with NY’s 529 College Savings Program, the CSA initiative will enable children to have access to financial resources to be used to obtain a post-secondary education. The initiative will encourage positive financial behaviors and life-long savings, through improved financial education and literacy, and will democratize the benefits of long-term investing.
The three-year pilot program will kick off in one City school district with approximately 3,500 kindergarteners in year one. Starting in fall 2017, kindergarteners in the participating school district will each start with $100 allocated to them in scholarship accounts, plus up to an additional $200 in matching funds during the program’s first three years. There is no cost to participate in the program, and all kindergarten students in that district will be automatically enrolled.
The City worked with leading social policy research firm MDRC to conduct six focus groups of 60 low- to moderate-income parents in New York City. MDRC found that while families care deeply about their children having the opportunity to go to college and were excited to learn about 529 accounts, almost no participants were previously aware of the tool.
As part of the partnership, NYC Kids RISE will oversee the scholarship accounts and programs within the guidelines of NY’s 529 College Savings program. The nonprofit will function independent of the City and have a full-time Executive Director and a Board of Directors. The Board will have representation from both City Hall and the private sector. NYC Kids RISE plans to launch efforts to raise additional funds to support the ongoing costs of the initiative and to explore opportunities to scale.
NY’s 529 College Savings programs are investment vehicles designated for saving for higher education. The CSA initiative will leverage the 529 platform and enable New York City students, regardless of circumstance, to take advantage of the benefits of investment and compounding growth.
The City worked to create an innovative account structure to enable all students entering participating schools to be in a position to benefit from the program’s philanthropic dollars. Under this structure, the funds invested in the scholarship component will be held in an omnibus account, and each participating student will be automatically assigned a portion of the total regardless of the families’ income or immigration status.
Through a unique hybrid structure, students will be able to participate in both a scholarship component and a family savings component of the program. Both the scholarship and family savings components will be invested in the 529 plan, so all funds will have the opportunity to benefit from compounding earnings. The family savings option will allow family members, relatives, and others to contribute to students’ education funds and have those funds be invested in a 529 plan.
