State Child Support Savings Initiatives

Thursday, January 29, 2015

With a downgraded bond rating, a state budget headed for a nosedive, and dismal analysis of the state’s safety-net programs, anti-poverty advocates have plenty to worry about. Perhaps that’s why we are particularly cheered by the Kansas Department of Children and Families’ (DCF) Child Support Savings Initiative (CSSI). The CSSI provides significant financial incentive—using the lever of forgiveness of state-owed child support arrears—to encourage non-custodial parents to make deposits into their children’s college savings accounts. Over the past year, we have helped state officials understand asset effects in education, bolster their rationale for supporting children’s savings, and, then, share this knowledge with their peers in child support programs around the country, including on a recent webinar for the Region V Fatherhood Initiative. It’s a model with potential to scale and could represent an important funding source for Children’s Savings Accounts for some families.

State-owed arrears are notoriously difficult to collect. To encourage states to adopt innovative approaches to arrears reduction, federal policy allows debt reduction agreements, and many states have given their child support enforcement agencies broad authority to experiment. While other states attempt to address non-custodial parents’ financial security, Kansas’ CSSI is the first to actually make deposits into children’s accounts and to explicitly use child support enforcement to foster educational asset building. Given the considerable evidence that having even a small amount of savings can greatly improve a poor child’s educational outcomes, Kansas’ approach may be especially promising. Our research at the Assets and Education Initiative (AEDI) reveals that having just $500 in college savings can make a low-income child more than six times more likely to graduate from college than without a college savings account. These outcomes result from cultivation of increased educational expectations, which serve to set children on a college-bound path. These effects may be particularly powerful for children in the Child Support Enforcement system, who often face multiple layers of disadvantage, including family dissolution, frequent mobility, low incomes, and asset poverty. While uptake has been slow so far, those who have opened accounts are saving and balances are growing.

In Kansas’ CSSI, a non-custodial parent can have $2 in state-owed child support arrears written off for every $1 deposited into a child’s new 529 account. Soon, Kansas hopes to expand the CSSI to include non-custodial parents who also owe arrears to custodial parents, using philanthropic dollars to hold families harmless. DCF is also working to address some of the aspects of the 529 system that are not perfectly suited to this children’s savings intervention, including the delivery of account statements to non-custodial parents and the state, instead of to the child, and the complexity of the investment vehicle.

No one intervention—even one as potent as early assets—can single-handedly overcome accumulated disadvantage. Still, the Child Support Savings Initiative is a promising bright spot, delivering transformative assets to disadvantaged children through innovative deployment of existing policy tools.

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