Exploring the Influence of Parents' College Savings on Low-Income Children's Two-Year or Four-Year College Attendance through Multiple Pathways

Background/Purpose:  College savings have been considered a promising strategy to pay for higher education, given the high college costs and inadequate financial aid.  A recent survey demonstrates high desires of college savings to cover the unmet costs of college and to avoid heavy loan debt. A number of legislative bills have been proposed to help low-income families accumulate their own resources for college, but the proposals have not yet been adopted at the national level.

Studies suggest that college savings can influence children’s educational outcomes in multiple ways: (1) Financial effect (2) Psychological effect: savings can give people a sense of confidence to prepare for their better future.  The effect of savings on enhancing college expectations has been suggested; and (3) Social effect: parents who have college savings are more likely to be involved in their children’s education.  The enhanced expectations and involvement could increase college access. 

However, the impact of college savings on attending two-year or four-year colleges among low-income students has not yet been fully explored.  As for the social effect, Pong et al. (2005) argue that parent-child discussions directly linked to college may play a crucial role in children’s educational outcomes.  Thus, in addition to parents’ and children’s college expectations, we pay special attention to the role of parent-child discussions about college as a potential mediator between savings and college attendance. By highlighting the importance of college discussions, we also hypothesized that children’s college expectations that is a significant factor of college attendance are associated with the discussions. 

Methods: We used the Education Longitudinal Study of 2002, and the sample was restricted to families with incomes at or below 185 percent of federal poverty guidelines (eligibility for free or reduced lunch programs).  The total number of sample students is 3,997 (weighted N= 979,674).  Depending on the pattern of missing data, the deductive and multiple imputation approaches were applied. Since the outcome variable (college attendance) is polytomous, multinomial logistic regression analysis was used.  For testing the mediation effect of college expectations and discussions, both the Baron & Kenny approach and multiple mediator model using bootstrapping were employed. 

Results:The results of this study suggest that college savings are a significant predictor of two-year college attendance but not of four-year college attendance among the low-income sample.  The results of two different mediating tests consistently indicate the statistically significant mediating role of parents’ expectations and discussions about college to predict college attendance.  Lastly, students who ever discussed attending college with their parents were over eight times more likely to expect to attend a four-year college than students who never engaged in such discussions. This study found the significant psychological and social effect of parents’ college savings on college attendance among low-income students.

Conclusions/Implications:  Findings of this study provide justification for the development of nation-wide asset-building social welfare policies, especially for families with low-incomes.  Ways to develop more effective college savings programs that would give additional incentives to those from low-income families are requested, along with the existing financial aid programs.