- Colorado Gov. Jared Polis on Monday signed into law an initiative that will provide every child born or adopted in the state as of Jan. 1 with $100 toward a college savings plan, available to their families until the child's fifth birthday, The Denver Post reported.
- The initiative could cost up to $3.4 million in 2020-21, funded through CollegeInvest, the state's nontaxpayer-funded college savings program. Colorado's program currently has funds to support the program for 10 years at a 10% participation rate; the law calls for it to run through 2040.
- The state hopes to spur more parents to open 529 savings plans. Participation rates vary widely among similar programs elsewhere.
Qualified tuition programs, more commonly known as 529 plans, were introduced in the late 1990s as a way to incentivize families to save for college. They have grown steadily since and are now offered by nearly every state.
The total amount invested by U.S. families in these programs rose from $105 billion in 2008 to nearly $329 billion in the first half of 2018, according to the College Savings Plans Network. The average account size increased from $10,690 to $24,153 during that period.
Beyond helping families, the plans can address chronic concerns about college affordability. Children with up to $500 saved for college are three times more likely to go on to college and four times more likely to get a diploma, according to a 2017 report from the Institute for Higher Education Policy and Prosperity Now (then called the Corporation for Enterprise Development).
Other states and municipalities are looking to provide starter funds in the hopes of getting more families to open 529 plans. This benefit goes beyond the tax benefits and matching funds some states offer.
Pennsylvania recently announced a program similar to Colorado's, expanding on an earlier trial program in six counties. State officials hope the plan will ultimately encourage more people to attend college. Rhode Island's CollegeBoundbaby has a similar purpose, and The Denver Post reported it has a 52% participation rate. Pennsylvania's and Rhode Island's programs each offer families $100.
Municipalities, such as Oakland, California, and San Francisco, also provide families with cash incentives to open and sustain college savings accounts. But a similar voluntary, state-piloted program in Worcester, Massachusetts, got off to a slow start with only 100 of more than 4,000 eligible families participating two years in. (The Colorado bill calls for an extensive advertising campaign.)