Pennsylvania Treasury to Grant $100 for College to All Babies, Starting in 2019
Tuesday, October 2, 2018
Posted by: Lindsay Broderick, Staff Writer
On June 22, Pennsylvania Gov. Tom Wolf signed a bill establishing the Keystone Scholars program, which will grant $100 to every baby born in Pennsylvania or adopted by Pennsylvania residents starting in January 2019. The children have from the time they turn 18 until their 29th birthday to claim their money from the Pennsylvania Treasury. The money can only be used for postsecondary education at an approved institution, including trade schools, vocational programs, community colleges, and universities both in and outside of Pennsylvania.
As postsecondary education becomes more expensive, College Savings Accounts (CSAs) are gaining popularity throughout the country. According to a 2017 brief by Prosperity Now, 382,000 children have a CSA through one of 54 programs that exist in 32 states and the District of Columbia.
According to the Keystone Scholars website, these funds are meant to encourage families to save for their child’s postsecondary education. Parents, however, will be unable to contribute to their child’s Keystone funds. The Pennsylvania Treasury will hold all the grant money in one bank account. If parents wish to contribute personally to their child’s postsecondary education fund, they must establish their own savings account. The treasury says it will help educate parents on the importance and utility of the Pennsylvania 529 College Savings Program through outreach methods such as informational mailers and community events. Parents can also visit the PA 529 website or call the treasury at 1-800-440-4000 and speak to a representative who can answer questions about account setup.
The account holding all the children's money will compound annually by 4.5 percent. The program will not be funded by tax revenue, but instead by existing surplus investment earnings in the Pennsylvania Guaranteed Savings Program (GSP) and philanthropic donations. The GSP has continued to run a surplus since the end of fiscal year 2011-12 and is currently at 117 percent. Meanwhile, more than $2 million has come in from donations. According to the Pennsylvania Treasury’s press office, these donations have come from the Richard King Mellon Foundation, the Henry L. Hillman Foundation, the Pennsylvania Higher Education Assistance Agency Foundation, the Heinz Foundation, and the Neubauer Family Foundation.
"We applaud our leaders' efforts to highlight the importance of saving money for a postsecondary education, and then making a $100 deposits for Pennsylvania children born in 2019 and beyond," said Saleem Ghubril, executive director of The Pittsburgh Promise. "This makes an important statement. What it does not do is address the fact that public higher education in Pennsylvania is the third most expensive in the country. We hope that our leaders also design policy solutions that make a postsecondary credential accessible to all Pennsylvanians."
Through the Keystone program, Pennsylvania joins Maine and Nevada as the only states with universal statewide programs that automatically enroll children in the program. Pennsylvania and Maine’s programs enroll newborn babies, whereas Nevada’s enrolls every kindergartner who attends public school in the state. Other states have their own universal programs available to their residents, but do not automatically enroll children. Instead, it is the responsibility of the parents to opt their child into the program. These programs include Rhode Island's CollegeBoundBaby, West Virginia's Bright Babies, and Connecticut's CHET Baby Scholars.
Prosperity Now says CSAs offer several incentives for middle- and low-income families. The accounts are free, and CSA programs often have professionals available to help parents start an account. CSAs sometimes come with other incentives to encourage continuous family contribution. Some programs offer to match contributions the family makes to the account. For example, the St. Louis College Kids program matches up to $100 in contributions during the first year, offers bonuses for good school attendance, and more incentives for parents who participate in financial education.
CSAs also correlate with other benefits for the family, such as developmental and academic advantages for children and psychological relief for mothers. A Prosperity Now Fact File released in September 2016 reports that students from low-income families with a CSA, on average, scored nine points higher on math standardized tests and had higher scores on parent-recorded responses to questions on their social-emotional development. Additionally, mothers with a CSA for their child showed less maternal depressive symptoms than those without. However, the oldest CSA program has only been in existence for about 10 years. Consequently, there can be no definitive answer on whether they are beneficial in getting students to enroll in college.
According to Prosperity Now's 2017 brief, 50 percent of CSA programs rely on multiple types of funding. Sixty-nine percent of CSAs in 2017 were funded by philanthropic donations from local organizations and other foundations. The second most common source of funding was private donations providing funding to 46 percent of CSA programs, and corporations came in third, at 35 percent. Meanwhile, public funding is lower. Any public funding, including 529 plans, state funding, and federal funding, only made up 33 percent of funding for CSAs.
(Image via https://www.pa529.com/keystone/)