(MoneyWatch) Children from minority or low-income families with as little as $500 in savings for college are still three times more likely to attend school and four times more likely to graduate than their peers.
The power of saving even modest amounts of money for college was shared this week in a new report sponsored by groups including the Charles Stewart Mott and Ford foundations. Given these findings, the authors of the report urge policy makers to look for innovative ways to encourage college savings accounts.
The report from the Assets and Education Initiative at the University of Kansas noted that most of the discussion about the cost of college has focused on borrowing for college and fixing the nation's financial aid system. But what's even more important is to get more families to save for this big-ticket item whether they can afford to or not, according to William Elliott III, director of KU's Assets and Education Initiative,
"As a nation, we can't significantly increase college completion rates -- essential to global competitiveness -- by relying disproportionately on borrowing," the report concluded.
It also noted that copious research indicating that any amount of savings can boost college attendance among low-income students and those of color.
Providing incentives for families to save can be a powerful way to increase the number of Americans who graduate from college. "Children's savings accounts can and should be a step toward changing the educational trajectories of disadvantaged, but talented children in the United States," the report suggested.
The groups urged policymakers to explore the creation of a federal child savings account that would include such characteristics as child enrollment in an account at birth; initial deposits that could be taxpayer-financed for at least low and moderate-income families; and public matching contributions.Help kids while they're young
The report also suggested that the federal Pell Grant program, which provides grants of up to $5,550 a year for low-income college students, could be started at a much earlier age. In what would be a dramatic change, the authors suggested that Pell Grants could be awarded to children via college accounts years before students are heading off to college.
One promising pilot program along those lines is the "Kindergarten to College" program in San Francisco, which is done in partnership with Citibank. The city deposits $50 into a college savings account for every child attending one of its public schools. Children who qualify for free or reduced lunches receive an extra $50.