Mother's Educational Expectations and 529 College Savings Account: Using State-Wide Social Experiment Data
Considering potential returns to higher education, educational attainment has arisen over time and parents tend to have higher expectations for children’s education. However, variations in educational attainment still remain, and socioeconomically disadvantaged groups are often challenged by financial burden and lack of information on college education. While various policies have been discussed for higher education, we focus on Child Development Accounts (CDAs), universal and progressive savings account designed to facilitate early start of college savings with financial incentives to low- and moderate-income families. In this study, we use data from birth records and SEED for Oklahoma Kids (SEED OK) to answer two primary questions: (1) Is there a significant association between mother’s educational expectations and 529 college savings account holding? (2) Does CDA policy intervention have impacts on 529 account holding through mother’s educational expectations?
The SEED OK is a policy experiment with randomly selected new-born children in Oklahoma. The SEED OK children (N=2704) were assigned randomly to treatment and control groups after a baseline survey was conducted and before SEED OK intervention began. SEED OK provides financial incentives to treatment group, including savings matches for income-eligible families and information package encouraging 529 account opening. Data come from birth records, the baseline SEED OK survey conducted in 2007–2008, the follow-up SEED OK survey conducted in 2011, and 529 college savings account data measured from 2008 through 2012. The two surveys were collected from mothers of the SEED OK children. The dependent variable is 529 account holding status as of December 2012. Independent variables of primary interest are treatment group status and mother’s educational expectations in the follow-up survey. Educational expectations are measured by asking “How far in school do you think that [your child] will go?” with five response categories from “won’t finish high school” (=1) to “will go to graduate school” (=5). Control variables include characteristics of child, parents, and family, and expectations measured at baseline. We run bivariate tests and regression analyses.
Treatment participants are significantly more likely to hold 529 accounts than control group. Also, treatment participants report significantly higher educational expectations. Controlling for other characteristics, mother’s educational expectations are significantly and positively associated with 529 account holding. We do not find evidence that educational expectations statistically mediate the treatment impact on 529 account holding, yet the association between expectations and 529 account holding appear to be better explained with treatment group status. All else equal, control participants even with expectations for their child’s college education are less likely to hold 529 account than treatment participants with and without college education expectations.
Using rigorous experimental research design, our study suggests that SEED OK intervention may motivate mothers to keep educational expectations high and hold 529 account for their child’s future education. The findings supports that CDAs may be effective in facilitating parents’ financial preparation early along with positive outlook for children’s future education.