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In Maine, Three Generations Work The System To Save For College


Seems like a problem that just keeps getting worse. It's often hard to go to college without piling up student loan debt. Policymakers are trying to get creative, in some cases, turning to children's savings accounts. There are states that are partnering with private funders to give cash grants to newborns. The goal is to encourage their families to begin saving for college. Maine was the first state in the nation to try this. Here's Maine Public Radio's Jay Field.

JAY FIELD, BYLINE: Five years ago, when Gretchen Lane gave birth to her first child, Maine offered her a deal - open a college savings account with the state and get a starter deposit of $500 from the Harold Alfond College Challenge, named for the noted philanthropist.

GRETCHEN LANE: Right when we were in the hospital, they give us paperwork about it. And you just take it home and fill it out. It was really easy.

FIELD: Lane went ahead and opened an account for her son Bentley. She opened another for her daughter, who arrived two years later. By offering the starter grant in exchange for opening a so-called 529 account, the Alfond Challenge hoped to persuade more middle and low-income families to begin saving for college. Gretchen Lane is an elementary school teacher on a tight budget, so Lew Elliott, Gretchen's dad, started a small business on the side to help her out.

LEW ELLIOTT: We're looking at the farm stand for the grandkids. All of the cash that comes into it goes towards their college fund.

FIELD: Big boxes of summer squash, bright yellow and luscious looking, sit inside the stand at the end of Elliott's driveway in central Maine. The grandchildren often tagalong when the grandparents head to the bank with their small cashbox to make deposits.

L.ELLIOTT: I mean, it's $1 bills crumpled up that we try to flatten out - a lot of change - but the kids are involved with the whole process.

FIELD: Elliott says the family has already saved around $7,000. In its first five years, the Alfond Challenge awarded a little over $11 million. Colleen Quint heads the Alfond Scholarship Foundation.

COLLEEN QUINT: Great outcome in a lot of ways, but our hope was really to capture all the kids.

FIELD: Instead, just 40 percent of eligible families signed up. And researchers found that those that did were likely to be more educated, make more money and be more financially sophisticated than the middle and lower income families that the Alfond Challenge was especially interested in reaching. So last year, the foundation changed the rules. Now all babies born in Maine get the $500 grant whether they open a 529 account or not. Families that don't want to participate simply opt out.

WILLIAM ELLIOTT III: One of the things that having an opt-out program does is it gets everybody on board so everybody gets to know they have an account.

FIELD: And that, says William Elliott III, is where word of mouth comes in. Elliott, an assistant professor at the University of Kansas, has done extensive research on children's savings accounts as a way of saving for college. He says middle and lower income families are much more likely to learn about the existence of these accounts from neighbors and friends in a similar financial bracket.

W. ELLIOTT: Whereas in an opt-in program, I mean, a select few people might get those accounts based upon their interactions with the 529 program or financial advisers.

FIELD: The Alfond Challenge and the state of Maine say that convincing families to open 529 accounts is still a goal. Research by Elliott and others show that having savings accounts from a young age can improve college enrollment, completion and overall financial health after graduation. It's a big reason why other states are also partnering with private funders to experiment with their own versions of the Alfond Challenge. For NPR News, Jay Field. Transcript provided by NPR, Copyright NPR.

Jay Field is a reporter for MPBN Radio based in the network’s Bangor bureau. In his reporting for the network’s flagship program, Maine Things Considered, Field enjoys exploring how real people’s lives are impacted by the unique policy challenges, economic, education, natural resource and otherwise, that come with daily life in a rural state.