Invest in college education early

Guest Commentary:

For many Montana families, the true cost of sending their children to college doesn’t hit home until their student’s senior year in high school. All of a sudden, they find themselves sitting at a financial aid night, listening to school counselors drop acronyms like FAFSA, EFC and SAR, wondering how on earth they are going to pay for postsecondary education.

In my 30-plus years of working in the postsecondary education finance and access arenas, I have come to realize that the above scenario is far from being the exception — unfortunately, it’s the norm. Nonprofit Student Assistance Foundation (SAF) believes SB328 is a crucial step in delivering the message to Montanans that postsecondary education is not only important, but possible.

SB328, sponsored by Sen. Llew Jones of Conrad, provides seed funding for Montana college savings accounts for every child born in the state of Montana. The intention of this bill is to provide a tool for, and to encourage families to start, saving for their child’s future higher education expenses from the beginning of the child’s life. Just as retirement requires long-term planning and saving, so does addressing the cost of postsecondary education.  Families that make saving for college a priority will be able to leverage interest earned on their investment, rather than worry about how their children will pay the interest accrued on a student loan after they get out of school.

SB328 would establish the Education is the Best Bet Savings Account program (EBB). Parents would sign up for an EBB account by checking a box on the paperwork required to file for their child’s birth certificate, and the account would be seeded with a $25 deposit from the state of Montana. For the first two years of the child’s life, contributions made to the child’s 529 college savings account would be matched by the state with a contribution to the child’s EBB account, up to $100 a year. The EBB account – and the family’s 529 account for the child – would grow with ongoing deposits from family and friends and interest earnings, allowing the education savings to grow. When the child’s senior year in high school rolls around, the family would know they have financial resources available to help address the cost of the child’s college education. In fact, if families were able to save $100 a month throughout the child’s first 18 years, assuming a modest interest rate, the savings and interest earned would exceed $25,000. Using an EBB and making regular deposits to the family’s 529 account for the child would reduce the amount needed to borrow to pay for college, and the amount of time spent in student loan repayment in the future.  

Tuition freezes adopted by the Board of Regents and funded by the Montana Legislature have been great steps to improve postsecondary affordability. However, the most recent data on student loan debt shows that graduates from the Montana University System who have to borrow, leave with an average debt burden in excess of $27,000. Montana is a state that historically has not been a major provider of need-based aid for its students. In fact, according to The Pell Institute for the Study of Opportunity in Higher Education, for every $20 the federal government spends on Montana’s low-income learners, the state provides just $1 of need-based aid.  The inevitable result of this situation is that students look increasingly to student loans to pay for postsecondary education. According to the Montana University System, only about 60 percent of Montana’s high school graduates pursue postsecondary education immediately following high school – a statistic that has remained virtually unchanged for the past two decades. This is the scenario even though data is widely available that shows college graduates earn, on average, $1 million more over their lifetime than high school graduates. In addition, unemployment rates for college graduates are significantly lower than for those without higher education credentials.

By making an investment in education at the outset of a child’s life through a program like the Education is the Best Bet Savings Account, the state of Montana is stating, loud and clear, that getting a postsecondary education matters. It also demonstrates that lawmakers and Montana citizens are concerned about the level of debt burden students are accumulating to pay for postsecondary education. Beginning a child’s life with the assumption and expectation that he or she will pursue education beyond high school sets Montana students on the path to success. Studies show that a low-to-moderate-income child with college savings of $500 or more is about four times more likely to graduate with a postsecondary education credential than a child with no savings account. SB328 would seed a children’s savings account for Montana newborns, placing them, and their families, in prime position to build a solid educational future.

— Jim Stipcich is the president and CEO of Nonprofit Student Assistance Foundation