State savings plans would help pay for college

BOSTON – As tuition soars for public and private colleges, lawmakers want to create a taxpayer-funded savings plan to help students from moderate- and low-income families.

Lawmakers are considering several plans to ease the burden of college tuition, which increased an average of 8 percent nationally in the past year. 

One proposal, filed by state Sen. Jamie Eldridge, D-Acton, deposits $250 into an account for every child born in Massachusetts. For families that meet federal poverty guidelines, the state will match up to $250 a year in deposits made by a child’s parents.

The funds become available when a child turns 18 and enrolls in college, Eldridge said. Participants can withdraw money for educational purposes such as tuition, books or travel to school.

“It embarrassing that Massachusetts is one of the only states that doesn’t have this kind of program in the works,” Eldridge said. “We need to make sure that every child has a chance to go to college regardless of their socioeconomic background.” 

But the plan doesn’t come cheap. With more than 72,000 babies born in Massachusetts every year, their college accounts could cost taxpayers more than $18 million a year.

Eldridge said the money is an investment in the state’s future. But Sen. Barbara L’Italien, D-Andover, a member of the Legislature’s Joint Committee on Higher Education, said the funds should come from private donors.

“It’s a laudable goal, but I just don’t see the state being able to afford that,” said L’Italien, whose committee will hold a hearing on the proposals on Sept. 16.

Treasurer Deborah Goldberg, who manages the state’s finances, is expected to unveil a similar plan to offer tax-free college savings accounts for kindergarteners that would be funded by private nonprofit groups.

Under Goldberg’s plan, each student receives $50 deposited into a special trust fund managed by a public-private partnership. Parents would be able to pay into the fund until a child enrolls in college.

Unlike Eldridge’s plan, support would come from private fundraising. 

Goldberg is expected roll out the program in coming weeks and announce a year-long pilot in a yet-to-be-announced city or town. 

On a federal level, Congress could soon debate a similar plan to set up each child born in the country with a savings account as part of a major revamping of the tax code.

The legislation would provide each child with a $500 savings account as a way to curb poverty.

Other states have approved similar programs, often using a mix of private and public money.

Vermont lawmakers approved a bill in May that opens savings accounts for every baby born there. Those not from low-income families get $250, while those who meet federal poverty guidelines get $500.

The plan doesn’t rely on taxes but is supported through private fundraising. State officials estimate costs of more than $3 million a year to create the new accounts.

In Maine, every baby born in the state automatically gets a college savings account with $500 in seed money. The program is funded by the private Alfond Foundation.

College savings plans are becoming even more popular as tuition and fees at public colleges continue to rise – by more than 40 percent in the past decade, adjusting for inflation, according to the U.S. Department of Education.

Costs are rising even faster at private colleges and universities.

Freshmen at Boston University this fall have to cover an estimated $48,436 per year in tuition and fees — 17 percent more than the private university charged four years ago, according to the National Center for Education Statistics. The total cost, including housing, is $62,956 per year. 

At Merrimack College, tuition for the past year was $36,215, according to the center, a more than 10 percent increase from the $32,865 incoming freshman paid two years earlier.

Massachusetts ranks 12th in the country for the number of students carrying college loan debt, according to a report released last year by a state legislative committee. Nearly two-thirds of Massachusetts students borrow for college.

Richard Doherty, president of the Association of Independent Colleges and Universities of Massachusetts, said savings plans not only help pay for tuition but set children on a path to higher education.

“There’s a lot of evidence that if a student is aware they have a savings plan, there’s a far greater chance that that they will go onto college,” he said. “There’s an aspirational quality to these savings plans.”

Christian Wade covers the Massachusetts Statehouse for CNHI’s newspapers and websites. Reach him at cwade@cnhi.com