You Pay Your Share, We\u27Ll Pay Our Share : The College Cost Burden and the Role of Race, Income, and College Assets

Changes in financial aid policies may place too much of the burden of paying for college on students. In addition, incentives for accumulating college assets may exacerbate the college cost burden on minority and lower income students. Our study investigated the impacts of these policy changes on college cost burden using trivariate probit analysis with predicted probabilities. We find that recent changes in the financial aid system place a higher responsibility on African American, Latino/Hispanic, and moderate-income students to pay for college themselves. an implication is that greater opportunities for more and higher dollar grants and scholarships at 4-year colleges are needed for African Americans. Further, there is a need to create more grants and scholarships that target Latino/Hispanic students as well as moderate-income students at both 2-year and 4-year colleges. We also find that students are less likely to pay for college with student contributions when parents open a savings account, start a state-sponsored savings plan, or open a college investment fund . However, nonminority and higher-income families are more likely to have college assets than their counterparts. Therefore, we suggest an additional strategy to to reduce the college cost burden on students is to create policies that will encourage accumulation of college assets among minority and lower-income families

PREDICTING SAVINGS FROM ADOLESCENCE TO YOUNG ADULTHOOD: EARLY ACCESS TO SAVINGS LEADS TO IMPROVED SAVINGS OUTCOMES

Young people’s savings has received attention for its unique effects on educational outcomes, namely college attendance and graduation. Young people are three to six times more likely to attend and graduate from college when they have savings accounts of their own compared to those without savings accounts, even when considering household income and assets. Given these findings, researchers and policymakers are offering up young people’s savings as a solution for mitigating the effects of parents’ and households’ financial resources on educational outcomes. For the most part, research focuses on young people’s savings as a predictor, giving less consideration to variables that predict their savings. This distinction is relevant given the potential for selection bias in how young people come to have savings. Young people’s savings may be another manifestation of households’ financial resources, meaning that young people have savings accounts more often when their parents and households have greater financial resources. Along these lines, questions of interest include whether young people’s financial outcomes, and ultimately their educational outcomes, can be improved by extending access early in life to basic financial services like savings accounts. This dissertation tests predictors of young people’s savings—including having savings accounts and median amount saved (±$600)—between adolescence and young adulthood using a longitudinal sample (N = 694) from the Panel Study of Income Dynamics (PSID) and its 2002 Child Development (CDS) and 2007 Transition into Adulthood (TA) Supplements. Propensity score weighting accounts for observed selection into groups of adolescents with and without savings accounts. As the evidence stands, early access to savings leads to improved financial outcomes. Results indicate that young adults are almost two-and-a-half times more likely to have savings accounts and almost two times more likely to have savings above the median when they have savings accounts as adolescents. Young adults are more likely to have savings accounts and more money saved when their heads of households have more education and prestigious occupations, and parents have savings on adolescents’ behalf (e.g., 529 savings plans, Roth IRAs). Policy innovations that extend access to savings accounts may be a novel way to improve young people’s outcomes

The Potential for Savings Accounts to Protect Young-Adult Households from Unsecured Debt in Periods of Macroeconomic Stability and Decline

The effects of different types of debt can vary widely: some debt is considered productive by advancing financial health, while other debt can be unproductive, pushing financial health out of reach. A savings account may be associated with young-adult households’ reduced reliance on unproductive debt and their increased access to productive debt that can facilitate wealth building. This article tests the association between a savings account and debt in the lives of American young adults during periods of macroeconomic stability and decline. Owning a savings account in 1996 was associated with a 14 percent decrease (844) in young − adult households′ accumulated unsecured debt, while closing an accounting 2008 was associated with a 12 percent increase (1,320) in this type of debt. Thus, a savings account may help young adults invest in their debt by entering better, healthier credit markets and protecting them from riskier ones, especially during bad economic times

Testing an Asset-Building Approach for Young People: Early Access to Savings Predicts Later Savings

A major hypothesis of asset-building is that early access to savings accounts leads to continued and improved educational and economic outcomes over time. This study asks whether or not young adults (ages 18 to 22), particularly lower-income young adults, are significantly more likely to own savings accounts and to accumulate more savings when they have access to savings accounts at banking institutions as adolescents (ages 13 to 17). We investigate this question using longitudinal data (low-to-moderate income sample [LMI; N = 530]; low-income sample [LI; N = 354]) from the Panel Study of Income Dynamics and its supplements. Results from propensity score weighting and bivariate probit estimates support this hypothesis. Asset-building policies that extend early access to savings accounts may improve savings outcomes for young people from lower-income households

Policy Recommendations for Helping U.S. Households Build Emergency Savings

In households without emergency savings, an unexpected expense or financial shock can heighten stress and threaten the ability to meet basic needs. This brief, released through the Grand Challenges for Social Work initiative’s network toBuild Financial Capability for All, identifies three types of policies to enable U.S. households to save for emergencies

Two Accounts for Why Adolescent Savings Is Predictive of Young Adult Savings: An Economic Socialization Perspective and an Institutional Perspective

Economic socialization and the institutional theory of saving offer different accounts for why adolescents\u27 savings predicts savings in young adulthood. Economic socialization theory emphasizes the role that the family plays in whether or not youth develop a future time orientation and a habit of saving. Conversely, an institutional theory is built on the premise that acquisition of financial knowledge and resources are strongly influenced by structural failures related to social class and race. Using longitudinal data (N = 694) from the Panel Study of Income Dynamics (PSID) and its supplements, this paper asks whether having savings as an adolescent (ages 13 to 17) predicts having savings as a young adult (ages 18 to 22). Policy implications are discussed using both approaches and conclusions are drawn about how the approaches can be combined to create a saving intervention for adolescents

Predicting Savings From Adolescence to Young Adulthood: A Propensity Score Approach

This is the publisher's version, also available electronically from http://www.jstor.org/.This paper examines the progression of savings between adolescence and young adulthood. Using data from the Panel Study of Income Dynamics, we ask whether the likelihood of having a savings account in young adulthood and the amount of savings can be significantly predicted by two factors: having a savings account during adolescence and having parents who own assets. Descriptive statistics reveal that adolescents with savings accounts are more often White, employed, and live in households in which the head is married, has more education, and owns assets. Propensity score analyses confirm that young adults are more likely to have a savings account when they have a savings account as adolescents. Some evidence suggests that adolescents whose parents have savings on their behalf and have higher net worth are more likely to have higher amounts of savings as young adults. Findings suggest that parents play an important role in modeling saving habits for adolescents. Further, our findings suggest that having a savings account in adolescence leads to an increased likelihood of having a savings account in young adulthood; however, this finding requires confirmation in future research

Policy Recommendations for Financial Capability and Asset Building by Increasing Access to Safe, Affordable Credit

Strong credit is a prerequisite for financial well-being, but many U.S. consumers lack access to safe and affordable credit options. This brief, released through the Grand Challenges for Social Work initiative’s network toBuild Financial Capability for All, identifies policies that would enable households to build and maintain credit and that would ensure access to credit products with adequate consumer protections

Taking Stock of Ten Years of Research on the Relationship Between Assets and Children\u27s Educational Outcomes: Implications for Theory, Policy, and Intervention

This paper has two main goals. First, we provide a review of 38 studies on the relationship between assets and children’s educational attainment. Second, we discuss implications for Child Development Accounts (CDAs) policies. CDAs have been proposed as a potentially novel and promising asset approach for helping to finance college. More specifically, we propose that CDAs should be designed so that, in addition to promoting savings, they include aspects that help make children’s college-bound identity salient, congruent with children’s group identity, and that help children develop strategies for overcoming difficulties

Policy Recommendations for Expanding Access to Banking and Financial Services

Access to financial services is a necessity in the modern economy, yet many households lack such access. This brief, released through the Grand Challenges for Social Work initiative’s network toBuild Financial Capability for All, identifies policies with the potential to expand access to financial services for households in the United States