Delivering his inauguration speech, in 2018, St. Paul Mayor Melvin Carter listed starting “every child born in St. Paul with $50 in a college savings account” as one of his top priorities.

It’s an underwhelming amount, when compared the cost of higher education tuition. But the creators of the CollegeBound Saint Paul program, which is slated to roll out at the start of the new year, expect that the value of these accounts will far surpass their initial seed deposit from the city.

Research has shown that children from low- and moderate-income families with a college savings of $500 or less are three times more likely to attend college, and four times more likely to graduate than those without college savings.

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Having money set aside for a postsecondary education also helps foster a college-bound identity in children — something particularly impactful for children from low-income households. And it boosts expectations parents have of their children’s educational attainment.

In short, it’s a proven lever for closing education attainment gaps — and, by extension, an investment that helps families move out of poverty.

“CollegeBound Saint Paul sends a bold message to children and families in our community: we are invested in your future,” said Mayor Carter in a written statement about the program.

How it works

Under the Carter administration, a 31-member task force with representation from higher education institutions, birth centers, corporations, nonprofits and other sectors spent nearly a year pulling together a design proposal for a citywide college savings account program.

Similar programs already exist in other states and major cities, often starting when children enter kindergarten.

CollegeBound Saint Paul holds a key distinction: it’s the first city-led program that begins at birth.

Beginning Jan. 1, using public health records (excluding confidential birth records), the city will identify St. Paul newborns and auto-enroll them into the program (with an opt-out option available). Parents will receive information about the program — along with information about the account opened for their child and started with a $50 deposit — through the mail.

To help ensure the program reaches those not captured at birth, eligibility extends to St. Paul youth up to age 6. These families are invited to opt-in.

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Designated program staff, working in the city’s Office of Financial Empowerment, will be working with nonprofits and other entities to help get enrollment information into the hands of all families.

In St. Paul, over 96 percent of white residents over 25 have a high school diploma, compared to only 79 percent of blacks and 62 percent of Asians. Focusing in on youth in the St. Paul Public Schools district, 83 percent of white students graduated in 2018. Yet only 68 percent of both the black and Hispanic student populations graduated.

Those disparities persist when it comes to higher-education attainment. Fewer than one in five adults of color in St. Paul holds a four-year college degree, compared to more than half of white adults, as reported by Prosperity Now.

The initial $50 deposits for the estimated 5,000 children born as St. Paul residents each year will be funded through a combination of state and city dollars.

Bremer Bank, the city’s financial partner in this endeavor, will hold the savings accounts. The details of the contract are still being finalized, including the interest rate that Bremer Bank will agree to pay on these accounts.

Erin Dady, the bank’s chief marketing officer, says the partnership is a strong fit because Bremer is headquartered in St. Paul, where it was founded in 1944 and their missions align.

“I think a big part of this program is first sending a message, as a community, that we believe in the next generation and we’re willing to invest in them — and we see college potential in all of them,” she said, adding the bank has a role to play in terms of removing barriers that historically underserved families have when it comes to accessing and developing relationships with banks.

That could mean hosting open houses at bank branches throughout the city, so these families feel welcomed and able to engage with their children’s college savings accounts and gain more financial literacy.

These wrap-around elements of the program — including financial education for parents, free tax preparation, early childhood education components, and more — appealed to the Saint Paul and Minnesota Foundation, which helped fund the task force and will continue to host the program’s future operation fund, used to support program staffing and community outreach efforts.

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“We think this is a program that’s innovative. And we like that idea of it being intergenerational,” she said. “It’s not just about the children. It’s also about the parent or guardian that’s taking care of that child having that same hope for their child — that there is a path.”

Incentivizing additional deposits

The task force recommended a number of ideas aimed at encouraging parents to make additional deposits into their children’s college savings account, which can be used to pay not just for a two- or four-college degree, but other forms of postsecondary education as well.

Program staff say they are still finalizing the details of a few actions that will be tied to bonus deposits. That list includes things like logging into that account online for the first time, hitting milestones like well-baby checkups and birthdays.

These sorts of incentives have been employed by city staff in San Francisco, where the state launched a similar program in 2011. All public school children are auto-enrolled into the city’s Kindergarten to College initiative when they enter kindergarten, with an initial deposit of $50 made by the city.

The city has also developed a system for publishing all program informational materials in at least four languages, and oftentimes six languages, says Amanda Fried, chief of policy and communications for the city’s Office of the Treasurer and Tax Collector.

There, the program’s oldest cohort has already reached ninth grade, and with more than 42,000 city-initiated college savings accounts currently open, there’s data to show the program is working.

In total, families have saved about $4.7 million of their own money in these accounts, with an average account balance of $500, says Fried. These contributions are significant, especially given the fact that at least half of these families qualify for free- and reduced-price lunch.

“It’s really about getting people to the starting line,” she says, noting the emphasis of the program is really about getting families to develop a college-bound mindset, more than it is about making college more affordable.

Pilot program in Minneapolis

With a narrower focus, the city of Minneapolis may soon join this growing list of government entities that kickstart and run college savings account programs. The City Council recently approved funding for a pilot program.

“We’re hoping to start a pilot that would be targeted to those especially in need,” Council Member Cam Gordon at a board meeting last week, adding it’s “a way for us to start repairing some of the historical damage that’s been done by an unjust economic system by helping some children start saving for college early.”