Education IDAs Research Team: Adrianna Kezar, Vikki Frank, Jaime Lester, Hannah Yang Center for Higher Education Policy Analysis Rossier School of Education University of Southern California Individual Development Accounts

Context: Grant aid has failed to keep pace with family and student’s financial need as federal support for grants and subsidized loans have been sharp decline over the past two decades. This affects low-income families the most!  financial obligations that make loans difficult to pay back  lack trust in financial institutions and debt instruments, especially among first-generation Americans  no or poor credit histories Education IDAs

Educational leaders are concerned that low-income individuals have the least opportunity to participate in higher education. Research on college access among low income groups demonstrates that while cost is one of the greatest barriers, life skills and support are also critical. Education IDAs and Higher Education

Opportunity: Individual Development Accounts (IDAs) represent an important underutilized solution to the problems of access and financial aid for postsecondary education for low-income working students. Education IDAs and Higher Education

IDA = matched saving account from students’ earned income Example: For every $1 you save, receive $2 in matched funds Save up to $2,000, earn up to $4,000 in matched funds Savings and match can help pay for college! Education IDAs

$2,000 (student savings) $4,000 (matched funds) $6,000 (total funds) $1,000 (student savings) $4,000 (matched funds) $5,000 (total funds) DO THE MATH $1,000 (student savings) $8,000 (matched funds) $9,000 (total funds) Education IDAs

Work and Save money in a bank account Complete a financial education course  Develop financial skills  Learn to establish & build credit Create an education plan Spend funds at an educational institution Education IDA Plan

IDAs (federal, state, and private) have different policies on the amount students save and the length of the program.  In general, students are encouraged to save a total of $600 over 3 years  Students save on average $20 a month  Disbursements occur each year towards tuition and other qualified expenses Education IDAs specifics

Education IDA: An Example Sara starts saving in December 2006 She saves $100 per month. December 2006 Sara begins saving $100 per month June 2006 Sara has saved $600 and earned $1,200. She can spend up to $1,800 on school. Sara spends IDA funds every semester for tuition, fees and books. 6 months August 2008 Sara saves $800 and earns $1,600. December 2006 Sara saves another $600, earns $1,200 and spends the $1,800 on semester months+ 8 months December 2008 Sara earns her degree! She graduates with $6,000 less in student loans and a valuable savings behavior + 4 months

How can Education IDA Funds be used? Yes Tuition Fees Books Supplies Equipment No Room & Board Student loans Electronics Car/transportation Parking

Who qualifies? Student’s family must have earned income: greater than IDA savings & less than program income limits Persons in Family or Household Ex: AFI limits = 200% of Poverty Guidelines (2007) 1$20,420 2$27,380 3$34,340 4$41,300 5$48,260 6$55,220 7$62,180 8$69,140 For each additional person, add $6,960

IDAs and FAFSA Do IDAs reduce financial aid packages? Savings AFI IDA is excluded as an asset No impact on EFC formula No impact on federal or campus- based aid Match No impact on federal & state entitlement grants Campus-based Funding? Outside resource Asset Gap Funding Last Dollar In Student always comes out ahead!

Post Secondary Educational Institutions can use IDAs OUTREACH TOOL to attract low-income students to their university RETENTION TOOL to encourage low-income students to stay in school LEVERAGE PRIVATE SCHOLARSHIP FUNDS for low- income students with student savings and IDA match FINANCIAL EDUCATION TOOL to help low-income students learn to effectively manage their finances, debt and credit Education IDAs

Ed IDA Challenges:  Universities have not been a stakeholder in IDA policy discussions and are, on the whole, unaware of IDAs  Universities are vast multi-faceted bureaucracies with multiple points of entry; it is difficult to identify the appropriate decision makers to introduce IDAs  IDAs comprise multiple components that cross over many university departments Education IDAs

Developing University Partners… Financial Aid Office Admissions Office Dean’s Office Student Services/TRIO College/University Foundation Cooperative Extension Service Micro-Enterprise departments Education IDAs

Assets for Independence   The largest federal funder of IDAs Center for Social Development   Directory of IDA programs in your state Education IDAs resources