Education IDAs

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Education IDAs
Individual Development Accounts

• Research Team Adrianna Kezar, Vikki Frank, Jaime
  Lester, Hannah Yang
  
• Center for Higher Education Policy Analysis
• Rossier School of Education
• University of Southern California
• http//www.usc.edu/dept/chepa/accounts/

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Education IDAs

• Context Over the past two decades, policymakers
  have shifted their financial commitments from
  scholarships to loans.
  
• 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

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Education IDAs

• Educational leaders are concerned that
  low-income families 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.

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Education IDAs

• Opportunity
• Individual Development Accounts (IDAs) represent
  an important underutilized solution to the
  problems of access and financial aid for
  postsecondary education.

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Education IDAs

• College is often a lot of financial firsts
• personal budget
• student loans
• student credit card offers

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Education IDAs

• IDA matched saving account
• 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!

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Education IDAs
DO THE MATH

• 2,000 (student savings)
• 4,000 (matched funds)
• 6,000 (total funds)

1,000 (student savings) 4,000 (matche
d funds)
5,000 (total funds)
1,000 (student savings) 8,000 (matche
d funds)
9,000 (total funds)
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Education IDAs

• Save 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

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Education IDA An Example
Sara starts saving in December 2006
She saves 100 per month.

June 2006
August 2008
December 2008
December 2006
December 2006
6 months
6 months
8 months
4 months
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.
Sara begins saving 100 per month
Sara saves 800 and earns 1,600.
Sara saves another 600, earns 1,200 and spends
the 1,800 on semester 2.
Sara earns her degree! She graduates with 6,000
less in student loans and a valuable savings
behavior
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How can Education IDA Funds be used?
No Room Board Student loans Electronics Ca
r/transportation
Parking
Yes Tuition Fees Books Supplies Equipment

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Who qualifies? Students family must have
earned income greater than IDA savings less
than program income limits
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IDAs and FAFSADo IDAs reduce financial aid
packages?
Student always comes out ahead
Savings of savings may impact EFC variable
s Parent savings Dependent student savings Ind
ependent student saving
1040/EZ Eligible
Match No impact on federal state entitlement
grants Private scholarships? Outside resource

Gap Funding Last Dollar In
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Education IDAs

• 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
  

14
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
  

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Education IDAs

• Developing University Partners
• Financial Aid Office
• Admissions Office
• Deans Office
• Student Services/TRIO
• College/University Foundation
• Cooperative Extension Service
• Micro-Enterprise departments

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IDAs and Financial Education/Literacy

• How much financial education/literacy activities
  are happening on college campuses or in high
  schools
  
• Oklahoma new policy and high school program
• Talent search and some TRIO
• Conducting survey of financial education

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Education IDAs

• Project Goals
• Increase IDA use for educational purposes and
  increase post-secondary educational institutional
  involvement with IDAs.
  
• 1) understand the role IDAs currently play in
  creating access to college through asset
  development
  
• 2) examine the potential for IDA growth with
  respect to increasing access to education for
  low-income students
  
• 3) explore challenges and opportunities to the
  growth and expansion of IDAs within the
  post-secondary education sector
  

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Education IDAs

• Project activities
• Interviews with IDA practitioners that currently
  have educationally-oriented IDA Initiatives aimed
  at understanding current models of post-secondary
  education institution participation
• Focus groups bringing together leaders in the
  IDA, higher education, and philanthropic
  communities
  
• Develop detailed models for expanding University
  IDAs and for overcoming challenges

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Education IDAs

• Developing Partnership Models
• University-Community Partnership
• University-High School Partnership
• (Education Trust, TRIO, GEAR UP, Urban Alliance
  and Maya Angelou)
  
• University-based IDA