Vermont will soon join a number of other states in launching a children’s savings account program aimed at encouraging more low-income children, and their parents, to consider higher education.
Under a bill passed by the Legislature, savings accounts will be opened for every baby born in Vermont — $250 will be deposited for those who are not low-income, $500 for those who meet federal poverty guidelines.
The savings accounts will be funded through philanthropic contributions from foundations and fundraising efforts — not from state taxes.
Gov. Peter Shumlin will appoint a committee to begin the fundraising phase of the program.
It’s estimated that $2.5 million to $3 million will be needed to open savings accounts for the 5,000-6,000 babies born in Vermont each year.
Shumlin, House Speaker Shap Smith, Rep. Jill Krowinski, D-Burlington, Scott Giles, president of the Vermont Student Assistance Corp. (VSAC), and other supporters during the session called for the creation of child savings accounts “… to give every child born in Vermont a head start on saving for higher education and boost the number of Vermont kids who move beyond high school,” an announcement from the governor’s office stated.
The legislation was introduced by Krowinski.
“Universal savings accounts for college is one strategy we can use to knock down barriers to higher education and help end generation poverty,” Krowinski said. “We know, in order to reduce the number of children and families living in poverty in Vermont, it’s critical we create long-term solutions to increase access to higher education and improve financial literacy.”
Vermont has serious challenges, Krowinski said, including:
• More than 50% of Vermonters do not possess a college degree;
• The percentage of children in poverty in Vermont is rising;
• Vermont will need an additional 58,000 college degrees to meet its workforce demands in 2025.
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Reps. Sarah Buxton (left), D-Tunbridge, and Jill Krowinski, D-Burlington. Photo by John Herrick/VTDigger
“Research shows that when low- to moderate-income children have a savings account with anywhere from $1 to $499 in it, they are three times more likely to go to college and four times more likely to graduate,” Krowinski said.
Under the initial legislation, Vermont students would be able to withdraw the money once they turn 18 or enroll full-time in post-secondary education, including a college, university, vocational school, or any two- or four-year degree program from an accredited educational institution.
Encouraging savings
The program will eventually match up to $250 a year on a dollar-for-dollar basis in those accounts for each eligible child whose family has an income of less than 250 percent of the federal poverty level, the legislation states.
Hal Cohen, secretary of the Agency of Human Services, said when he was a child, his grandmother told him that she was setting aside money from her weekly paycheck so that he could attend college.
He was the first in his family to attend college, he said, and knowing that his grandmother was planning for him was an important message, he said.
Cohen said a similar program in Maine began because the former owner of the Dexter Shoe company, Harold Alfond, sold the business and established a philanthropic foundation with his fortune.
Alfond had not gone to college, but wanted that opportunity to be within reach of all Maine students.
“He started this program where he set up savings accounts where every child born in Maine got a $500 savings account, and this program has kind of caught on,” Cohen said.
“A lot of what it’s about is expectation … so if you’re a young child and you learn you have this savings account for college, you have now instilled in that child’s mind, ‘…Oh, I have a savings account for college, I am going to college.’”
Sarah Phillips, a program administrator in the Office of Economic Opportunity within the Department for Children and Families, under the Agency of Human Services, said children’s savings accounts can help “… low-income families grab the next rung on the ladder and move forward to get ahead. Savings are really aspirations in tangible form.”
Having a universal children’s savings account program in Vermont means that conversations about saving and investment and interest will happen more at dinner tables and in classrooms, and will be part of conversations for children from all socioeconomic backgrounds, said Phillips.
Scott Giles, president and CEO of the Vermont Student Assistance Corp., said the idea for children’s savings accounts has taken off in the New England states, as well as nationally.
The war on poverty once focused heavily on home ownership for low-income people but today, the bridge to a better future through education is well understood, and that’s where the children’s savings accounts come into play, Giles said.
“This is something that is possible for your student,” is the message of hope that the establishment of the education funds in the name of every child born in Vermont communicates, Giles said. “The vision that we’re hoping for is that this will be an opportunity to engage families right at the point that their children are born.”
The program will be known as the Vermont Universal Children’s Higher Education Savings Account Program and will be administered by VSAC.
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