Reducing Student Debt
I’ve been tracking the news to see how the student loan interest rates will change. The rise in interest rates will only impact new loans, so maybe that is why the issue wasn’t addressed prior to July 1st when legislation expired. The hope among many is a retroactive roll back from the current 6.8% to 3.4%.
While I was tracking the news, I discovered a new research report from the University of Kansas associated with the “Gear Up” program. The report centered on using Children’s Savings Accounts (CSAs). CSAs are matched savings accounts and are automatically opened at birth. Children are unable to access money saved in CSAs until they reach age 18 or graduate from high school. Children and families contribute savings to the accounts, and matches are added for completion of savings or developmental milestones. CSAs, in this case, target higher education. The report gives early results from making this a key part of an education program for disadvantaged youth.
I’ve had conversations with communities who wanted to set up a similar program on a smaller scale. They encountered the same problems: finding a partner to provide the matches and management issues.
I can think of several reasons the approach makes sense. You have 18 years to stress the next step in gaining valuable workplace skills; teaching the habit of savings; giving a good example of delayed gratification; and children will have ownership of the investment they are making in themselves. Perhaps Kansas can lead the way to resolve the challenges and make this one way states can reduce student debt.