Los Angeles provides every freshman with money for college

A GIANT EXERCISE to give money to children is underway. On March 21, Los Angeles Unified, the second-largest school district in the United States, enrolled every freshman in a free college savings account program, depositing $50 for each child. With 44,000 students, Opportunity THE is the nation’s largest children’s education savings program.

Children’s savings accounts (CSAs) usually help achieve a specific goal, usually college or buying a house. There are many barriers to building savings, especially for the poor. Most important is the lack of funds to set aside for later, but bad experiences with banks – worries about credit scores, for example, or fears about overdraft fees – also put people off. An automatic program can encourage families to invest.

Opportunity THE will allow families to use the savings account for school fees and associated costs, such as tests and supplies. Funds can be used for any two- or four-year program at an accredited institution. If families pay additional money and file taxes in the county, they will receive a matching contribution (up to $25 per year). If a student leaves the district, funds are forfeited and any family contributions returned. Families can opt out of the plan, but few are expected to.

Such efforts elsewhere have been successful. PLANT for Oklahoma (SEEDS OK) started 15 years ago. The newborns were randomly selected to receive $1,000 for the state college savings plan and compared to those who weren’t selected. Families who received the money enjoyed long-term benefits. They were more likely to have opened an additional education savings account for their children, and they were more likely to expect their child to complete college.

SEEDS OKBeneficiaries of have not yet graduated from high school, but other studies have found positive results from college savings, automatic or otherwise. A study found that poor kids who expect to graduate from college and have up to $499 in their accounts are three times more likely to graduate.

Since SEEDS OK, other automatic programs have started. In 2011, San Francisco became the first publicly funded universal city. CSA project in America. Two years later, Maine was the first state to require parents to opt out if they wished to avoid automatic enrollment; participation increased from 40% to 100%. Other states followed. A universal program is set to launch this spring in New York City, the largest school district, and the Governor of California intends to launch a statewide program soon. The seeds are scattered across America.

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This article appeared in the United States section of the print edition under the title “Seeds of learning”

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