New Report: Children’s Savings Accounts and Financial Aid

Posted by on May 29, 2007

Children’s Savings Accounts and Financial Aid: An Examination of the Consequences of Children’s Saivngs Account Ownership on Financial Aid Eligibility (pdf)
Carl Rist, Jennifer Brooks, and Kevin Keeley, CFED

A growing body of academic research suggests that saving plays an important role in educational attainment, changing aspirations, and breaking the cycle of poverty. Anecdotal evidence suggests that a lack of hope is a factor in many of the poor choices made by young people. With nest egg savings, all children may be able to look toward a future in which they have the resources and know‐how to invest in themselves.

The Saving for Education, Entrepreneurship and Downpayment (SEED) Policy and Practice Initiative is a multi‐year national effort to test this idea by implementing a limited number of matched savings accounts for children and youth in 12 sites across the country. These demonstration sites are experimenting with a variety of program structures and providing evidence for state and federal policymakers that SEED accounts should be universally available to all children in the United States. CFED?s experience with these demonstration sites, however, has raised concerns about whether SEED accountholders will face unintended negative consequences as a result of their savings when they apply for financial aid to attend college. This concern has led us to explore the implications of children?s savings account ownership on eligibility for financial aid. This work has implications both for the approximately 2,000 children participating in the demonstration programs, as well as for children who in the future might have the opportunity to open an account as a result of a state or federal policy change.

http://www.cfed.org/publications/CSAs_financial_aid.pdf