We have all become familiar with the increasing financial costs to attending higher education, and the mounting debt loads students are expected to acquire. Grant aid has failed to keep pace with family and student’s financial need as federal support for grants and subsidized loans have been sharp decline over the past two decades. The possibility that government will again provide large numbers of need-based scholarships is becoming increasingly unlikely. Unfortunately, this situation impacts low and moderate income families the most. Educational leaders need to look for alternative solutions for low-income students.
It is this challenge that is being addressed through a grant supported by the Lumina Foundation called: IDA-PAYS: Postsecondary Access for Your Success. The research is aimed to bridge two worlds – postsecondary education and the non-profits that offer IDAs – and explore how together they can help low-income students enroll in and stay in higher education. We believe IDAs are part of the search for alternatives as each community finds its own solutions to providing access to postsecondary education for its youth. This project is designed to provide tools for IDA practitioners who want to partner with postsecondary institutions to offer education IDAs. In addition, this project can help educational leaders to identify ways to work with community agencies to provide more support for low income students.
So, what are IDAs and what do IDAs have to do with postsecondary education? IDAs are matched savings accounts that may be state, federally and/or privately supported. An IDA is a financial tool to encourage low-income families to save towards and acquire an appreciating asset, such as homeownership, entrepreneurship and post-secondary education. IDAs were introduced by Michael Sherraden at the Center for Social Development who suggested that a lack of assets, not just income, keeps the poor in a cycle of poverty. Over the years, his research and that of others has shown that poor families can save and build assets if provided institutional supports parallel to incentives available to middle and upper class families – supports like 401Ks that provide employer-match and tax incentives. IDAs took on national recognition when congress funded the American Dream Demonstration through the Assets for Independence Act of 1998. In 2005, CFED estimated that there are between 500 and 1,000 IDA initiatives nationwide.
Organizations that offer IDAs often couple the match incentive with financial literacy education, training to acquire the asset, and critical case management. IDAs expansion can advance access and success in postsecondary education in important ways. Therefore, IDAs offer the promise of not just scholarship funds, but the opportunity to foster critical new life skills and behaviors with respect to financial management, credit and debt — skills that are crucial to the financial independence of student graduates and working adults. In this way, IDAs lead to lifetime habits of goal-setting, saving, financial management, and asset building that can break the cycle of poverty.
View IDA-PAYS final report: Examining the potential of education IDAs