Effective financial resources are only as valuable as they are accessible to those who need them. 529 plans, and CSAs broadly, are potentially game-changing tools for families positively impacting their trajectories of opportunity. Yet, low income families currently use 529s at only a 4% rate. 

What actions can stakeholders such as providers, state governments, and CSA programs take in order to help families with low- and moderate-income (LMI) make the most of 529 plans? What are the barriers LMI households face and what program and policy innovations can be implemented so that financially underserved communities can leverage 529 plans in order to build wealth while saving for emergencies?

To examine these questions and more, Commonwealth hosted a webinar moderated by Director, Gosia Tomaszewska, with Jerome Barnes, Senior Innovation Manager at Commonwealth; Julie Peachey, Deputy State Treasurer for Consumer Programs, Pennsylvania Treasury; and Colleen Quint, President & CEO, Alfond Scholarship Foundation. The conversation centered around how innovation in the 529 space can lead to more access for families living on low and moderate incomes, which in turn can lead to intergenerational wealth building. Our panel brought unique experience working with 529s, as well as policy, state, and broad industry perspectives. 

Here are three key takeaways from the webinar:

1. Innovation can decrease barriers. As outlined in our latest report, Parents can take advantage of state 529 plans to save for their children’s future education in an account with growth potential. But families with LMI—who have much to gain by increased enrollment in college and other opportunities beyond high school—rarely have 529 accounts. Barriers including lack of a reserve of funds and difficult enrollment processes prevent LMI families from participating in 529s. As Jerome Barnes highlighted, “one CSA program doesn’t fit every person. We have to listen to families and we have to design with them.” In order to eliminate these barriers, solution-based products need to be designed to support families who lack awareness about and access to 529s.
2. National policy is needed to increase access. At both the state and national level, policies are needed that will make innovation and access a possibility. This is an issue that garners bipartisan support as it addresses issues that impact many communities across the nation. Julie Peachey noted how “one of the biggest things we need is partners that can help work with us on the education piece.” We really need strong financial education, as well as trusted partners to work with families and actually help them understand what CSAs are and help them open accounts.
3. Cross-sector collaboration is key. In order to have effective implementation of policy and innovation, governments, nonprofits, and 529 providers need to work together. As Colleen Quint shared, “partnerships are very important in building awareness and they also build trust.” 

529s provide the infrastructure needed to make saving for postsecondary education accessible to families living on low and moderate incomes. However, in order to make that happen, as an ecosystem, we need to work together to eliminate barriers through innovation and foster policy change at the state and national level to make access to these products possible and convenient for families with low- and moderate-income.

This research is made possible in part by BlackRock’s Emergency Savings Initiative & Annie E. Casey Foundation.

BlackRock’s Emergency Savings Initiative

In 2019, BlackRock announced a multi-year, $50 million philanthropic commitment to help millions of people living on low- to- moderate incomes gain access to and increase usage of proven savings strategies and tools – ultimately helping them establish an important safety net. The Emergency Savings Initiative (ESI) is a key part of The BlackRock Foundation’s mission to help people beyond the firm’s core business to build financial security. The size and scale of the savings problem requires the knowledge and expertise of established industry experts that are recognized leaders in savings research and interventions at the individual and corporate levels. Led by its Social Impact team, BlackRock is partnering with innovative industry experts Common Cents Lab, Commonwealth, and the Financial Health Network to give ESI a comprehensive and multilayered approach to addressing the savings crisis.