Building Assets Through College Savings: A Pathway to Opportunity

1
Building Assets Through College Savings A
Pathway to Opportunity

• Presentation by David H. Reisdorph
• Oklahoma College Savings Plan Task Force
• October 6, 2006
• Oklahoma City

2
The Oklahoma Kids College Savings Campaign
(OKSEED)

• The Oklahoma Kids College Savings Campaign
  supports public policies that offer public and
  private matches for qualified participants in the
  Oklahoma 529 College Savings Program. By helping
  more Oklahomans save for college we have the
  opportunity to build the assets that fulfill the
  American Dream.

3
The Basis for OKSEED

• Since the early 90s, research on poverty shows
  that asset building moves low-income families out
  of poverty.
• The leader of asset building research, Michael
  Sherraden of Washington University finds
• "For the vast majority of households, the pathway
  out of poverty is not through consumption, but
  through saving and accumulationWhen people begin
  to accumulate assets their thinking and behavior
  changes as well."

4
Asset Building is a Bridge from Dependency to
Opportunity

5
College Attainment Opportunity

• On average, a person with a 4-year college degree
  can expect lifetime earnings 80 greater than a
  person without a degree.
• Massachusets with the highest percentage of
  adults with 4 year degrees (37.4 in 2004)
  produced 21,729 more in per capita gross state
  product than West Virginia with the lowest
  percentage of adults with 4 year degrees (16.3).
• Oklahoma ranks 41st among the 50 states in the
  percentage of adults with a 4 year degree (22.2)
  and 46th in per capita gross state product.

6
Oklahoma Findings from Measuring UPThe National
Report Card on Higher Education

• In Oklahoma, the chance for college enrollment by
  age 19 is low (37) when compared to the top ten
  states (51).
• The percentage of working-age adults enrolled
  part-time in education or training beyond high
  school has declined by 11 over the past decade.
• Net college costs for low- and middle-income
  students to attend public two- and four-year
  colleges represent about one-third of their
  annual family income. These families earn on
  average 19,114 annually.

7
AFFORDABILITY
Oklahoma has made no notable progress in
providing affordable higher education. This year
Oklahoma receives an F in affordability.
8
Savings In Oklahoma

• Household net worth that includes all types of
  wealth, including savings, is low in Oklahoma
• Oklahoma ranks 45th among the 50 states in the
  amount of household net worth (39,400 in 2004).
• The investment firm, A.G. Edwards ranks Oklahoma
  47th out of the 50 states in its 2005 "Nest Egg
  Index" that measures the strength of household
  savings.
• Most Oklahoma families do not have sufficient
  savings to help pay for their childs college
  education.

9
Saving Behavior Why People Do Not Save

• People significantly discount the future.
• Inertia--what a person is saving (or not saving)
  today will be close to what they will save in the
  future.
• People value losses more than gains.

10
Why Encourage More Oklahomans to Save for College?

• Even moderate saving efforts can make a
  difference for low to moderate income families.
• Time-value of money.
• Tax preferences that stretch savings further.
• Security of having more Oklahomans having their
  own money to pay for college.
• It expands choice of the colleges that Oklahomans
  can send their children.
• Sets childrens college expectations, MORE
  OKLAHOMA CHILDREN WILL ATTEND COLLEGE.
• Increases financial responsibility and encourages
  further saving.

11
(No Transcript)
12
Saving Behavior Can Change

• Demonstrations with matching deposit programs
  like Individual Development Accounts (IDAs) show
  even low income households want and can save when
  encouraged and given a little assistance.
• Research on savings behavior finds rules,
  programs, expectations, and requirements strongly
  influence savings behavior.

13
Why Existing Policies Fall Short for Low and
Moderate-Income Families

• Rules, programs, expectations, and requirements
  to save are mostly targeted and available to
  people with high incomes.
• For example, the tax deduction for contributions
  to the Oklahoma College Savings Plan are of less
  benefit to lower-income families, which typically
  have little or no state income tax liability
• Lower-income families are believed to participate
  less in 529 Savings Plans.
• OHLAP (Oklahomas Promise) and other forms of
  tuition assistance cover as little as a third of
  the total cost of a college education.
• Low to moderate income families often cannot
  bridge the gap between tuition assistance and the
  full cost of college because they lack college
  savings.

14
Oklahoma Kids College Savings Campaign Proposal

• For children born in 2008 and beyond, the
  Campaign proposes
• The Oklahoma State Treasurer's Office will
  establish an Oklahoma 529 College Savings Plan
  with an initial deposit at birth of 200.
• The Oklahoma State Treasurer's Offices will match
  11 low-income parent contributions to their
  Oklahoma 529 College Savings Plans up to 100
  annually for at least the first five years of
  life.
• The State of Oklahoma will provide state income
  tax deductions of up to 500 annually per
  employee for employer matching contributions to
  employees' Oklahoma 529 College Savings Plans.

15

• For more information on college savings, asset
  development and the Oklahoma Kids College Savings
  Campaign, please visit
• www.okseed.org