Investing in You: Save for college, and save the world

KN RESPONSIBILITY PH
Despite its widespread and negative impact, the current economic downturn may perhaps benefit one particular group of people, the young generation. (Robert West/Philadelphia Inquirer)

Children who set up a small savings account for college are more likely to attend and graduate from college than those who have no such savings, according to a report from Stateside, a project funded by the Pew Charitable Trust.

Some states (alas, not Pennsylvania or New Jersey) have set up junior savings accounts for college in which $100 is automatically deposited upon a child's birth.

The federal government might set up something similar if U.S. Sens. Chris Coons and Marco Rubio prevail. They are pitching a bill called the American Dream Accounts Act.

It would create online college savings accounts to help students, particularly low-income children, access a college education. Low- and moderate-income students with a college savings account in their own name are three times more likely to attend college and four times more likely to graduate than their peers without accounts, according to Stateside and research by Coons.

The bipartisan bill was introduced by Coons (D., Del.) and Rubio (R., Fla.) during the 2012-14 congressional session and was reintroduced in March by U.S. Rep. Chaka Fattah (D., Pa.).

Why now? The gap between rich and poor young people going to college has widened. In 2012, about 51 percent of recent low-income high school graduates had enrolled in college, while enrollment by middle-income students was nearly 65 percent, and even higher, nearly 81 percent, for high-income students, according to Pew Research Centers. A separate Brookings Institution study found that among the wealthiest Americans, 79 percent go to college and 53 percent graduate, while among the lowest-income Americans, only 34 percent go to college, with just 11 percent graduating.

American Dream Accounts would follow students from school to school and through college. Parents could grant stakeholders (including counselors, teachers, coaches and mentors) access to the accounts to update student grades, monitor progress, and provide college preparatory support.

Coons launched and ran a chapter of the national "I Have a Dream" Foundation, a nonprofit dedicated to college access, in East Wilmington, Del. He found that lower-income students who frequently move or change schools can get lost in the system.

That's why portability is proposed for American Dream Accounts. The bill, H.R. 1359, has been referred to the Committee on Education and the Workforce.

Sustainable Investing 529 Plans. While we're on the subject of education, you can save for college and help the environment at the same time through sustainable investing.

Kathryn Flynn of Savingforcollege.com notes that 529 college savings plans now offer "socially responsible investing" options, or SRIs.

Some SRI portfolios screen for companies focused on environmental sustainability, such as providers of solar and wind power, and electric car manufacturer Tesla.

Other SRIs avoid companies that make a profit from alcohol, tobacco, oil, gas, coal, and other fossil fuels. Here's a look at some of them.

Parnassus Socially Targeted Investment. This portfolio, available through Virginia's 529 plan, has an investment strategy that seeks out companies that respect the environment and have ethical practices. Companies it avoids include those affiliated with gambling, weapons, alcohol, and tobacco.

TIAA-CREF Social Choice Investment Portfolio. It carries stocks of companies that focus on product safety, corporate citizenship, human rights, and environmental protection. The plan is available through California's ScholarShare College Savings; the Connecticut Higher Education Trust; the Oregon College Savings Plan; Texas's Lonestar 529 Plan; and Wisconsin's EdVest.

Vanguard Social Index Portfolio. Its stocks are screened for social and environmental criteria; it is available through the Pennsylvania 529 Investment Plan.

Calvert Investments. One of the largest sustainability-oriented mutual-fund firms, its SRI options include funds that analyze governance and ethics, workplace, environment, product safety, and impact; international operations and human rights; indigenous peoples' rights; and community relations. Calvert is available through Washington's College Savings Plan.

Is mixing social ideals with saving for college a savvy idea? That's unclear.

The fees on these SRI funds are similar to what you get anywhere else, said Jim Johnston, founder of Sage Scholars, which offers tuition reductions.

"But are we doing this for politically correct reasons or is it in demand by the public?" Johnston asks. "The goal is to get everyone to save and pay for college, whether borrowing from their grandparents or saving in a 529."

 


earvedlund@phillynews.com

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@erinarvedlund