Education Policy, Business and Technology

College Savings Accounts Are Popular But Missing Their Marks

Governing: In the spring of 2014, Ed FitzGerald visited a Cleveland elementary school to announce a new and highly ambitious education program: free college savings accounts with cash subsidies for every kindergartner in Cuyahoga County, Ohio. At the time, FitzGerald was the county executive and the Democratic nominee for governor. A similar savings account program had been introduced a few years earlier in San Francisco, but that was an experiment limited to public schools. FitzGerald’s initiative included children in private and parochial schools as well. With 10,500 accounts in its first year, it promised to be the largest effort of its kind in the country.

At a press conference, FitzGerald cited the increasing cost of higher education and low college attendance rates as reasons for the new program. Past efforts by the state and federal governments to encourage saving for college, through so-called 529 investment vehicles, had largely failed. Research from the Board of Governors of the Federal Reserve System found that in 2013, these 529s achieved a meager 2.5 percent participation rate among eligible families. For households in the bottom half of the income distribution, participation was below 1 percent.

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