Maine Becomes First State to Provide College Savings for All Newborns

Sherraden, CSD research helps state advance ‘opt-in’ 529 program

Released: 6-Mar-2014 12:00 PM EST
Source Newsroom: Washington University in St. Louis
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Newswise — This week, the state of Maine became the first in the United States to make college savings for newborns universal and automatic, putting into practice research pioneered by Michael Sherraden and the Brown School’s Center for Social Development (CSD) at Washington University in St. Louis.

“For the past several years, we’ve been working on this innovation with colleagues in the state of Maine, which considers it an extension of the vision of philanthropist Harold Alfond and research of the CSD,” said Sherraden, PhD, the George Warren Brown Distinguished University Professor. “We value their foresight, innovation and partnership.”

Since 2009, Maine has offered a program in which parents had to open a 529 college savings plan account to receive a $500 grant. Called the Harold Alfond College Challenge through the Harold Alfond Foundation, it was a fairly successful one at that, with a 40 percent take-up rate. But foundation executives felt the program had peaked.

“The chair of the Harold Alfond Foundation requested findings from the CSD to inform discussions about making enrollment in the College Challenge automatic,” said Margaret Clancy, CSD policy director. “The foundation’s grant report, published in 2013, cited CSD research that suggested that, if universal enrollment is the policy goal, an ‘opt-out’ strategy will reach all families, including disadvantaged children who could most benefit from the College Challenge.”

On March 6, the Harold Alfond Foundation announced that all Maine resident newborns will automatically receive the $500 grant in a 529 college savings plan for postsecondary education.

“Since 2009, we have funded nearly 23,000 grants, investing almost $11.5 million on behalf of Maine’s children,” said Greg Powell, chairman of the foundation. “But it is not enough. To meet the future workforce needs of Maine’s economy, we need every baby to have the $500 Alfond grant — not just the opportunity to receive it.”

Based on current expected birth rates, the foundation estimates an average annual payout going forward of approximately $6 million to cover grants for 12,000 babies.

“We understand that the $500 we will provide is just the first step,” said Colleen Quint, president and chief executive officer of the Alfond Scholarship Foundation, the nonprofit organization that manages the Harold Alfond College Challenge.

“We try to provide a lot of information that we hope will prove inspirational to the students and their families. We especially will continue to encourage families to open their own accounts and make their own contributions,” she said.

Maine’s announcement is the latest in a string of successes Sherraden and his CSD research team are starting to see in the area of child development accounts. In January, the first impact research was published from a seven-year collaboration with the state of Oklahoma — a project called SEED for Oklahoma Kids (SEED OK).

The findings: A child development account in a child’s name not only gives disadvantaged parents hope for the future, it also results in improved social-emotional health for their children. The study, published in JAMA Pediatrics, found that positive effects occurred regardless of whether parents deposited the money into an account themselves, indicating that neither the act of saving nor the amount saved is relevant in this developmental improvement.

“It appears to be the account and holding assets that matter,” Sherraden said, “even if a mother does not have her own money to contribute at the moment.”

“CSD is helping us become aware of other models,” Quint said. “We had plateaued in the level of participation, and realized that it wasn’t so much the act of the parent opening the account – although that is important over the long term. Our goal is to make sure every child has the Alfond grant. Everything else we do builds from that platform.”

“Maine’s College Challenge serves as a model for other state 529 college savings plans,” Sherraden said, “and also will inform policy discussions and proposals at the national level.”

Visit csd.wustl.edu to read the complete report, “Automatic Deposits for All at Birth: Maine’s Harold Alfond College Challenge.”

To read more about the Maine program, visit 500forbaby.org.


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