By Eva-Marie Ayala
Source: Dallas Morning News
Madison, 6, gathered pennies along with classmates and hurriedly placed them in brightly painted piggy banks as the grownups around them talked about the youngsters’ college plans.
That future seemed far off for her mother, Karina Chavez who hadn’t had much time to think about a savings plan for the first-grader. The more immediate focus for the single mother of two was juggling a full-time job and her own studies at the University of North Texas.
Still, she knows she wants to take away as much future financial stress as she can from Madison.
And on Thursday, Chavez learned she’ll get a kickstart on college savings for her daughter’s education through a new program aimed at helping students from low-income elementary schools in Richardson and Lancaster.
“This has really opened up my eyes to start,” Chavez said. “I see how my own student loans are increasing, and I don’t want that for my children. I want them to have money there so they take out fewer loans.”
A new “Dollars for College” program — created by the Communities Foundation of Texas and United Way of Metropolitan Dallas — gives participating kindergartners and first graders at three Richardson and six Lancaster elementary schools $50 in seed money for a 529 savings plan.
The plans aren’t designed to earn large amounts of money right away but are aimed at getting families to start planning for college now. Kids who have even small savings for college are three times as likely to attend, officials from the Communities Foundation of Texas said.
“We know a $500 goal isn’t a lot,” said Wende Burton, the foundation’s senior director of community philanthropy. “But it’s a semester at a community college. It’s books and fees. It can offset the cost of college in some way that can mean a degree or a certificate program or licensing.”
Parents must opt in to set up the plans for their children. Then over the two years, a collation of nonprofits will match what families contribute up to $150 annually. Families will also be able to earn additional funds for the plans by meeting certain incentives, which could be attendance goals for students or involvement in parent-teacher meetings.
The 529 plans, named after a section of the Internal Revenue Code that governs them, include state-sponsored savings plans that aren’t taxable if used for college expenses. But very few families use such plans.
A 2016 Federal Reserve report found that only about 2.5% of families had such accounts. Most who did were wealthy, with only 0.3% of the households earning under $50,000 having such plans.
Parents will be able to direct how the plans are invested. Officials said they would meet with families over time to teach them more about how the plans work.
Initially, parents will set up a family plan while a separate one is set up in the student’s name, which is where the seed money and matching dollars will be sent, said Greg Mangum, United Way’s vice president of economic mobility. After two years, the student’s account will be merged into the family account.
And if a family limited the plan to only $500 raised in the two years of the program, the plan amount could potentially double by the time the student graduates high school depending on how parents decide to invest, the rate of return and the robustness of the market.
The program was launched in Lancaster this spring for that district’s kindergartners whose families wanted to participate. Of nearly 500 eligible, 434 families opted into the program for their children.
Thursday officials announced that the “Dollars for College” program is now available to all of this year’s kindergartners in Lancaster and to the kindergartners and first graders at three Richardson ISD campuses: Forest Lane Academy, RISD Academy and Audelia Creek Elementary.
That’s about 1,500 students eligible to participate this year, Burton said.
“We want to ensure that every student in North Texas can achieve their dreams beyond high school and help families to see that college is not just a fantasy but is an actual, achievable goal,” she said.
This article was published on: Sep 23, 2019