1. An Overview of College Savings Accounts: Options and Choices RAISE Texas Learning Forum: Taking College Savings Accounts to Scale November 1, 2011 Carl Rist Vice President of Programs CFED

2. www.cfed.org 202.408.9788 About CFED CFED (Corporation for Enterprise Development) has worked for over 30 years to expand economic opportunity by helping people save and invest, own homes, succeed as entrepreneurs, contribute to and benefit from the economy. Identify Good Ideas: CFED’s research finds ideas with potential for making the economy work for everyone, particularly those on the margins. Test Them Out: CFED works on the ground with local communities to test promising approaches and adapt them to diverse cultures and economic conditions. Bring Them to Scale: CFED then takes it to the next level, bringing effective approaches for building wealth and financial security to scale at the local, state and national levels. We combine the vision of a think tank with real-world experience to:

3. www.cfed.org 202.408.9788 CFED’s Engagement in CSAs SEED InitiativeKindergarten to College (SF) Partnership for College Completion Kellogg Children’s Savings Account Initiative

4. www.cfed.org 202.408.9788 What Are Children’s Savings Accounts? Children’s Savings Accounts (CSAs) are a promising way to increase assets and educational aspirations for children and their families. In their ideal form, CSAs are: Established for children as early in life as possible. Linked to an easy-to-use financial product. Seeded with an initial deposit and built by contributions from family, friends and children themselves. Augmented by savings matches and/or other incentives and age ‐ appropriate financial education. Used for an asset-building purchase, such as higher education, at age 18.

5. www.cfed.org 202.408.9788 Key Account Features  Ease of use  Safeguarding savings  Potential for meaningful earnings  Tax advantages/preferences  Financial aid implications

6. www.cfed.org 202.408.9788 Primary Account Options Statement Savings Account 529 College Savings Account Traditional and/or Roth IRA Coverdell Education Savings Account

7. www.cfed.org 202.408.9788 1. Statement Saving Account Pros Easy to use Cons Account access not restricted Limited earnings No tax preferences More likely to be counted in asset tests Other  Counted in determining a student’s financial need

8. www.cfed.org 202.408.9788 2. 529 College Savings Account Pros Account restricted to education expenses Earning potential Tax advantages Less likely to be counted in asset tests Cons Some features are not so easy to use Potential investment risk Other  Counted in determining a student’s financial need

9. www.cfed.org 202.408.9788 3. Traditional and/or Roth IRA Pros Account restricted to education expenses (and other uses) Earning potential Tax advantages Not counted in determining financial need Less likely to be counted in asset tests Cons Some features not so easy to use Potential investment risk

10. www.cfed.org 202.408.9788 4. Coverdell Education Savings Account Pros Account restricted to education expenses Earning potential Tax advantages Less likely to be counted in asset tests Cons Some features not so easy to use Potential investment risk Other  Counted in determining a student’s financial need

11. www.cfed.org 202.408.9788 Final Thoughts  No “perfect” account currently exists  Choice of account type depends on weighing various features against needs of savers and program  Having account custodian is costly and complicated, but can address a number of key features:  insure universal access,  integrity of use of match funds, and  avoidance of asset tests.

12. www.cfed.org 202.408.9788 Contact Carl Rist Vice President of Programs crist@cfed.org 919-246-4236 To learn more about CFED’s other children’s savings initiatives, please visit our Asset Building for Children webpage: www.cfed.org/programs/abcwww.cfed.org/programs/abc