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Cradle to college: Boosting expectations with college savings accounts

Image CC BY-SA 2.0 via flickr user USAG-Yongsan

As students across Nebraska head back to school for the fall, college affordability looms large on the minds of many high school seniors. Last week, President Obama addressed growing concerns over the rising costs of higher education with a new plan targeted at the middle class. His plan ties federal funding and financial aid to institutional and student performance, creates college score cards that evaluate value and affordability, and aims to better control student debt.

The value of a college degree in today’s labor market is evident— it is estimated that by 2020, 65% of American jobs will require postsecondary education.

College tuition has consistently increased faster than inflation.  Over the last five years, Nebraska’s average tuition at a public four-year college rose 17%  to $7,199 in 2012. Nationally tuition has risen 27% to an average of $8,655. With college tuition rising quickly, lower and middle income families are finding it increasingly impossible to afford the education necessary for successful economic participation.

Faced with bleak opportunities without a college degree, many students have turned to student loans.  In Nebraska, 63% of students graduating from a four-year institution had student debt.  The average debt was $24,287.  The growing costs of higher education can easily prove to be daunting enough for many youth to consider not attending college, especially for those already experiencing financial instability.

To help students and families with the high cost of college, college planning needs to start well before students begin preparing for the SATs. Studies show that although student aspirations to attend college are independent of socioeconomic circumstance, their behaviors and expectations are heavily impacted by social and financial realities. For many lower income families, the price tag of college feels hopelessly out of reach and navigating the student aid and loan application process is complex.

One way to offset the aspiration-expectation gap for low-income students is to encouraging college savings as early as possible.  This helps ease the obstacles that many underprivileged youth encounter when planning for college. Existing 529 savings plans, which largely benefit high-income families, often overlook the challenges lower income students face. Several states have already begun to implement more inclusive savings programs that ease access, diversify sources of investment, and strengthen incentives for savings.

Empowering children and helping them see that college is possible has spillover benefits in other areas: it helps business and state economies to meet the growing demand for an educated workforce, alleviates student debt loads, and cultivates capability in all youth regardless of socioeconomic status.

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