Editor’s note: This was the first in a two-part series examining St. Paul’s plan to start a college-savings fund for every newborn in the city. The second story was published Sunday, Dec. 29.

St. Paul has secured $2 million from philanthropists, businesses and the state to start a college-savings fund for every newborn in the city, but it’s not yet clear whether such asset-building programs actually meet their goals.

There are more than 60 child-savings programs in the U.S., most of which aim to get more children, especially those from low-income families, to pursue higher education.

Although researchers have found a positive correlation between childhood savings and college enrollment, there have been few randomized trials to support the case for public investment, and the programs are too new to see if they’re working.

“We’re still a couple years away,” said Shira Markoff, children’s savings director with Prosperity Now, a Washington, D.C., nonprofit that promotes children’s savings accounts and helped St. Paul design its program, College Bound St. Paul.

Starting Jan. 1, St. Paul will deposit $50 for every newborn resident in a custodial savings account at Bremer Bank. The city also is considering various bonus deposits, such as for logging in and viewing the account online, making a well-baby visit to a doctor or for milestones like a first birthday.

“Children with a college savings account that has between $1 and $500 are three times more likely to enroll in college,” the city states on its website for College Bound St. Paul.

That claim — which actually pertains only to lower-income families — comes from a widely cited 2013 paper by William Elliott, now a professor at the University of Michigan and the leading researcher on child savings accounts.

The paper, however, was not describing a program like College Bound St. Paul. Rather, it was based on wide-ranging surveys that happened to touch on both child savings and college attainment. Among low-income teenagers in 2002, those who reported having money saved for school were more likely to have attended and completed college by 2009.

Whether a universal, city-run savings program can accomplish what college-minded families did on their own remains to be seen.

The study also reached conclusions that cast doubt on the central theory about savings and college.

For example, families just under $50,000 in annual income were less likely to have a child go to college compared with those making even less money.

And no amount of school savings among higher-income families — those making over $50,000 a year — was a significant predictor of college enrollment.

“It does raise some doubt about whether or not designating savings for school might (have) positive effects for … children regarding college enrollment and graduation,” the authors wrote.

The authors also urged caution with their results given that so few lower-income participants in the study actually graduated from college — just 10 percent of the 512-person sample.

STUDIES SHOW PROMISE

Elliott declined an interview because he is under a multi-year contract to evaluate College Bound St. Paul.

But he pointed to a recent experiment in Italy that he said stands as the only randomized controlled trial on children’s savings accounts and college attendance.

In it, 770 low-income students in their last two years of high school were sorted at random into treatment and control groups between 2014 and 2017.

The first group received matching contributions of 2:1 and 4:1 as long as they contributed between 5 and 50 euros a month into a savings account for college expenses. They also had to attend financial education classes with their families.

Researchers found college enrollment increased considerably within the treatment group, especially among students who were on the vocational track and least likely to pursue higher education.

The authors recommended targeted interventions for that low-ambition group, as opposed to a program likes St. Paul’s, which will set aside money for all children.

“Targeting the intervention to this subgroup of students could improve the cost-effectiveness of the intervention, as the ‘deadweight’ (i.e. the share of students that would enroll at the university even in the absence of the monetary benefit) is smaller,” they wrote.

Minneapolis now is developing its own child savings program that would include all newborns but provide double the seed money for low-income children.

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In it, 2,700 children were sorted into treatment and control groups, with the first half receiving $1,000 in a state-sponsored 529 college savings plan at birth, plus matching contributions.

At age 4, the treatment group showed better social-emotional development. And those children’s mothers were less likely to be depressed and more likely to say they expected their children to go on to college.

BIGGER PURPOSE

For St. Paul Mayor Melvin Carter and his Office of Financial Empowerment, the college-savings initiative is part of a larger mission to lift up residents who struggle with money.

As the city pursues equity in housing and fines and fees, it aims to equip residents with tools to improve their personal finances. That’s one reason they’re working with the local Bremer Bank instead of the state-sponsored 529 college savings plan — to encourage low-income residents to establish a banking relationship.

“Opening accounts for participants and making initial deposits are only part of College Bound Saint Paul. Equally important is continually engaging children and their families in the program and leveraging the program as an opportunity to connect families with other services that improve their financial security,” the empowerment office said in preparation for a May meeting.

Ann Mulholland, who co-chaired the 50-person task force that designed College Bound St. Paul, said it’s about more than college.

“The purpose of these accounts is bigger. It is college and building hope. It’s also building wealth and building a relationship with saving and planning for the future,” said Mulholland, who is executive vice president of the St. Paul and Minnesota Foundation.

ST. PAUL LAGS IN COLLEGE GOING

Where college enrollment is concerned, there’s plenty of room to grow.

Just 60 percent of St. Paul Public Schools graduates enroll in college right after high school, compared with 68 percent of public school graduates statewide.

Trina Shanks, Elliott’s colleague at Michigan, expects the impact of College Bound St. Paul will be seen in those teens on the fence between enrolling in college and not.

“It makes a huge difference for that 40 percent … for those kids that are low-income that don’t think college is for them,” she said.

Shanks said it will be important for the city to communicate regularly with families that money has been set aside for college.

She has studied a short-lived Michigan experiment that awarded randomly selected low-income families $800 in the state’s 529 college savings plan, plus matching deposits.

Years later, after the program stopped enrolling new participants, she interviewed 20 families who had MI-SEED accounts. Nine hadn’t even spoken with their children about the accounts.

Despite having college money waiting for them, those “children’s responses to college aspiration questions and college funding questions were essentially the same as the children without SEED accounts,” Shanks found.

$2 MILLION CONTRIBUTED

St. Paul intends to spend $205,000 on the program next year for software, a program manager and an outreach coordinator. More of the initial funding will come from the state government and donors.

The Legislature and state Department of Human Services have contributed $1.05 million to establish College Bound St. Paul and seed the early deposits, according to the city.

Local nonprofits and businesses have put up another $1.06 million, according to the St. Paul and Minnesota Foundation, which is holding the donations.

By 2022, the city will need to find some $500,000 a year for initial and bonus deposits, assuming around 5,000 children are born in the city each year.

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Shanks, the Michigan researcher, said few families contribute to such programs, and the seed funding typically makes only a small dent in the cost of college. But the purpose of the programs is more about creating a “college-saver identity,” she said. “It can spark their imaginations.”

Jay Benanav, a former St. Paul City Council member and founder of the family college consulting firm College Inside Track, has seen in clients how a relatively small amount of money can push a teenager to enroll in college.

“If they have any money saved up, it changes their psychology,” he said. “Even a couple thousand dollars when you’re 18 gives you a little incentive — ‘OK, maybe I can make this happen.’ ”