Children’s Savings Accounts’ Influence on the Opportunity Pipeline

The rapid proliferation of Children’s Savings Accounts (CSAs) around the United States has somewhat outpaced research into how early children’s assets influence multiple aspects of children’s lives. As they contend with operational details and the challenges inherent in trying to make disconnected systems cooperate in the interests of children and their families, practitioners in the field often lack nuanced understanding of how a particular incentive might work or what to expect as a benchmark outcome at a specific stage of child development. Their efforts rest, however, on a burgeoning body of research that provides a sense of how CSAs may differ from other forms of financial aid and how these differences could make them powerful tools for facilitating children’s success. According to this research, CSAs are understood to begin working early in a child’s life, thereby affecting not only college affordability but also early preparation and achievement. Also distinct from other financial aid approaches are CSAs’ effects on students’ asset holdings and overall economic positions. When taken together, CSAs demonstrate unique potential to alter both educational and financial outcomes. More specifically, as articulated here, CSAs are understood to affect children at four stages of what we are calling the opportunity pipe­line: (a) early childhood, (b) school years, (c) college years, and (d) post-college years. Success in all four stages is crucial to the realization of strong returns on postsecondary educational attainment and the construction of a solid ladder of equitable upward mobility. By introducing the phrase “opportunity pipeline,” we intend to expand the notion of what financial aid really is or, at least, should be. CSAs are an investment in the ideal that every child in America should have an equal opportunity to achieve the American dream. Given education’s role in facilitating equitable chances at economic well-being, we see this as the standard to which financial aid policies should be held.

Going to School in Unequal America

In the United States, the education system is more than just a mechanism for transmitting knowledge. It is the nation’s most powerful tool for creating economic opportunities and helping individuals secure a good quality of life and parents’ primary plan for securing the well-being of their children. As such, educational attainment is often touted as the proverbial “key to the kingdom” that puts those who hold it on the path to prosperity. This link between economic mobility and education sets the United States apart from much of the rest of the developed world, where most countries have strong welfare systems that allow individuals to succeed routinely without postsecondary education. This international contrast provides an important framework for understanding how the role of education aligns with how Americans see themselves and their futures. More specifically, Americans vest their hopes in education as a means of getting ahead instead of relying on a generous welfare state that ensures that “nobody is in need”—the predominant view, for example, among Europeans. Crucially, the institution of education is supposed to work equally for all Americans, regardless of their starting point. This belief in education as a force for equity as well as opportunity was ensconced in its foundations, as articulated by Horace Mann in 1848, “Education then, beyond all other devices of human origin, is a great equalizer of the conditions of men—the balance wheel of the social machinery.” It persists, extolled by Arne Duncan, US Secretary of Education in the Obama Administration, “In America, education is still the great equalizer” and National Education Association President Dennis Van Roekel, “Education is the great equalizer . . . opening doors of opportunity for all.” However, there are signs that Americans increasingly doubt the viability of these egalitarian ideals and question whether education can truly realize the promise of a better future. In 2014, only 64% of Americans reported that they still believe in the American dream.

Toward an Equitable Opportunity Pipeline:The Creation of a Uniquely American Proposal for the 21st Century

The promising effects of relatively small-dollar Children’s Savings Accounts (CSAs) have catalyzed tremendous energy for universal provision of early asset accounts. Within the CSA field and among many close observers, there is consensus that CSA policy should start with an account for every child in the United States. As described in chapter 4, however, the promise of small- dollar CSAs is a bit of a double-edged sword. For some, the policy objective has become the account itself. Some proponents of this view believe that Children’s Savings Accounts are like infrastructure, a sort of social utility that has to be put in place—like plumbing—so that the benefits that these structures confer can then “flow.” Others may be eager for what seems like an easier win and consoled by the prospect of getting “something”—like the college-saver identities that early assets can cultivate—for nearly “nothing.” However, because this policy conceptualization fails to fully account for the problem of wealth inequality and its devastating effects on equitable educational attainment and upward mobility, such CSAs will likely fall short of the potentially transformative impact of children’s asset ownership. In this chapter, we discuss our understanding of CSA policy evolution in order to present a case for how CSAs can go beyond mere “plumbing” to truly revolutionize higher education finance. In accordance with Kingdon’s theory of how agendas advance, we then outline a policy suited to the problem to which our political system must respond: fractures in the opportunity pipeline that derail children’s futures and threaten the American dream. Instead of starting with what might be the easiest immediate win, we frame a vision of the powerful institutional tool children need: Opportunity Investment Accounts (OIAs), an essential investment in an American opportunity pipeline. Our emphasis on OIAs as conduits for meaningful wealth transfer rather than empty pipes does not mean that there are no benefits to small-dollar children’s savings. As described in chapter 5, a growing body of evidence attests to the intrinsic value of dedicated educational assets, early in a child’s life, even when small in amount.

Moving from the Status Quo to a 21st-Century Financial Aid System

With the creation of the first federal student loans as part of the National Defense Education Act of 1958, the US postsecondary financial aid system was set on a path from which it has not fundamentally deviated in the intervening decades. While college financing has trended almost inexorably toward greater reliance on student borrowing as costs have outpaced families’ incomes, the major components of the financing “mix” have remained unchanged. Financial aid policy is sometimes tweaked around the edges to lighten the burden of student debt, give colleges a competitive edge, or address undesirable disincentives. For the most part, however, these reforms bear more resemblance to the classic “shell game” than to authentic innovations. What American students need are more powerful tools with which to approach their futures—tools that help them prepare for higher education, persist to completion, and then leverage returns on their degrees. What they get, however, are repackaged versions of the same blunt instruments. While everyone wants improved outcomes from our financial aid investments, the nation’s apparent inability or unwillingness to innovate truly novel approaches to paying for higher education stands in the way of progress. The goal of financial aid policy has been narrowly framed as only helping young adults pay for college, a low bar that completely ignores the role financial aid could play in influencing early education, postsecondary completion, and post-college financial health. As a result, instead of receiving support at critical junctures along the opportunity pipeline to a prosperous adulthood, students are largely left to their own devices except at the moment when the tuition bill becomes due. To capitalize on the resulting missed opportunities, the United States needs more than different loan repayment schedules or loosened rules on grant disbursement. What we need is a fundamental shift in how we think about financing higher education and what we believe about why it matters.

Effort Appears Inadequate in the Modern World:Our Identities Are Shaped by Our Real- Life Chances

In its simplest form, the American dream is the belief that success should be determined by effort, not unfair advantage. This idea is embedded in the psyche of most Americans and shapes the way we collectively view individuals’ outcomes. It forms the lens through which we judge social policies that undergird opportunities or compound disadvantage. It is powerful enough to influence the way that people see their own success and failure and that of others. It can blind Americans to the structural forces that chart our fates. Indeed, Americans who want so badly to believe that there is a logic to the forces that shape their outcomes and a real path to their promised future may even excuse patently unfair institutions and the injustices they perpetuate. While these system- justifying beliefs can buffer people from the stress of contemplating abject inequity, as evidence mounts that things are not working as they should, defenses slip, doubts rise, and cracks emerge in the American dream. Today, there is a growing sense that this dream is more nostalgic memory than an accurate representation of the way the world works. A 2014 survey found that 48% of Americans believed that the American dream once was true but is not true anymore. These doubts represent more than just whispered anxieties or casual statements of political frustration. Instead, we contend that belief in the American dream is an expression of deeply rooted faith in our institutions and their ability to deliver on their promises, which in turn becomes a covenant in modern governance. This means that Americans’ increasing skepticism about whether institutions will ensure that their efforts pay off threatens the foundation of civil society. In other words, our inclination to rationalize societal arrangements has limits. When we can no longer explain away inequitable outcomes from schools, the labor market, and government policies, the social contract Americans have forged together is broken.

Conclusion:The American Dream Needs a Wealth Agenda

The American dream is imperiled. Nearly half of Americans who report having once believed that Americans who work hard will get ahead are no longer convinced that is the case. Many doubt that their children’s generation will be better off financially than theirs. Even more alarming, new research suggests that such fears are well-founded. As Americans take stock of their chances to “make it” and find that their realities lag behind their aspirations, the dream withers. Some scholars have even linked recent declines in life expectancy of middle- aged Whites to the hollowing of the American dream, attributing rising mortality rates to “deaths of despair.” Dimming prospects for climbing the economic ladder may threaten the survival of the American experiment. If the verdict was already rendered and the American dream beyond any possible repair, this would be a very different book. Certainly, there are no guarantees that narratives, even broadly shared, endure forever. However, we believe that the American dream is not only salvageable but eminently worth saving. It still holds considerable sway over personal ambitions and collective aspirations in the United States and around the world. In 1931, Adams credited the dream with having “lured tens of millions of all nations to our shores”; today, immigrants and their descendants are the most optimistic about the central premise of the dream: that all who work hard have a fair chance to succeed. Admittedly, the idea that working hard should help people get ahead is not peculiarly “American.” What makes the American Dream uniquely ours is (a) the contention that institutions should aim to create conditions that roughly equalize opportunity and (b) the confidence born of generations’ experiences seeing the dream materialize, albeit unequally. We see the American dream as worth a fight because it defines not only how Americans see themselves and their possible tomorrows but also how they see their nation and the opportunities they believe that nation should extend.

The Battle to Define Life Chances and the Distributional Consequences of the Current Education and Economic Systems in America

Our stories serve to illustrate that divergent experiences are not primarily the result of different choices or preferences. Willie’s route to and through higher education was often perilous and frustrating because he lacked the resources with which to maneuver and bend institutions in order to meet his needs. In contrast, Melinda’s college aspirations were encouraged and rewarded by the same institutions because she had the resources to make them work for her. As stark as these different routes were, if the gap in our families’ wealth had ceased to matter once we got our degrees, some might still argue that higher education is “working” as a leveler. Sure, Willie had to try harder, wait longer, and forego many opportunities, but isn’t it where you end up that really matters? Our stories suggest that the answer to this question is a resounding “No.” Instead, our lives continue to be marked by the effects of wealth inequality and by the substantial differences in how the education system treats those who start with money and those working to get it. This is the thesis of this chapter: that wealth inequality is not just another manifestation of unfairness in US society but instead a primary force determining how people fare, including in the institutions that are supposed to catalyze equitable opportunities. Our lives reveal how assets chart one’s course not only at the beginning of a college career but also well into a college graduate’s future. In Willie’s case, even though it has been more than nine years since he graduated from his PhD program, student debt still compromises his ability to leverage his relatively high salary to secure sound financial footing. His lingering financial instability is rooted in the economic disadvantages of his family of origin, but, critically, it was not erased when he graduated.