The Los Angeles Unified School Board is considering a proposal to open college savings accounts for all of its students to encourage more of them to enroll and graduate from college.
“This is part of a multi-layered strategy to increase college access for students and families who have been traditionally excluded from this part of the American Dream,” said school board President Steve Zimmer, who authored the resolution.
If the plan is adopted, the school district would partner with the city of Los Angeles and outside groups including the L.A. Area Chamber of Commerce to hammer out the specifics of how the accounts would be opened. Zimmer said that L.A. Councilman David Ryu approached him with the idea.
But there are lots of details to hammer out if L.A. Unified’s school board decides to move forward with the plan. Big questions include the cost of such a program to the school district, what financial institution would offer the accounts, and how much seed money would go into each account.
Zimmer said that he envisions opening accounts for every student with a $100 starting balance and matching funds for parent deposits. If the district were to open accounts for each of its current 640,000 students, the price tag would reach about $64 million.
Potential partners in the program also said they envisioned the costs being shared between public agencies and private business partners.
“Our suggestion to the district and the city is this should be a public-private partnership," said David Rattray, executive vice president of education and workforce development for the L.A. Area Chamber of Commerce. "We should pool resources."
There should be strong interest among banks and credit unions to run L.A. Unified’s program, even if the financial institution bears the entire cost of opening up and administering the student savings accounts, said Ted Beck, the President of the of non-profit National Endowment for Financial Education.
“For them it’s the idea of developing customers early and also helping those customers, because there’s a financial education component to this, understand how to save money and really develop very stable and positive financial behavior,” Beck said.
One possible model for L.A.'s effort could be a college savings program created in San Francisco in 2010, Beck said. That program opens a college savings account at Citibank for every kindergartener with a $50 initial balance from city and county funds.
College affordability advocates said there may be a simpler route to achieve the goals of making every student financially prepared for college.
“Making sure that financial aid applications are completed is probably the single most powerful tool for low-income students to ensure that they go to college and have the resources they need,” said Campaign for College Opportunity President Michelle Siqueiros.
In a letter to L.A. Unified leaders, her group said students who complete the Free Application for Federal Financial Aid (FAFSA) are almost 50 percent more likely to enroll in college than those who don’t, and those same students who file for aid are 72 percent more likely to reach college graduation once they enroll.
According to the Education Trust-West, 65 percent of L.A. Unified's graduating seniors in 2015 completed the FAFSA form. The school district has committed to reaching a 76 percent FAFSA completion rate for the class of 2019. The school district did not make it a graduation requirement.
But Zimmer said that low-income students who enter college with a college savings account are four times more likely to complete their degree than those who don’t have such an account.
“Financial strains and pressures contribute greatly, not only to first generation college students leaving college and not completing, but they also contribute to the stresses that lower grades at lower a student’s ability to perform at the optimal level in the higher education setting,” he said.
The L.A. Unified school board could vote in August whether to move forward on the college savings accounts.