conclusion of US loans problem


The idea behind providing people with early assets as a way to help level the playing field is a concept with which
most people are familiar. For simplicity, if you put $1 in a bank account or other investment vehicle (such as an a
state 529 plan or 401k) that has no money in it, you will earn far less from that same $1 than if you put it into a bank
account that has $10,000 in it already. More concretely, research reveals important relationships between initial
asset levels and future asset accumulation (Elliott & Lewis, 2014; Shapiro, 

Meschede, & Osoro, 2013). For example,
Shapiro, Meschede, and Osoro (2013) find that a $1.00 increase in income later translates to a $5.00 increase in
wealth for Whites, but only a $0.70 increase for Blacks. However, when initial assets are considered, they find that
Blacks have a return of $4.03 for each dollar increase in income. These findings point to the fact that initial asset
levels may play an instrumental role in the power of income to generate assets. Moreover, they suggest, if we can
help people build initial assets levels through repurposing the Pell Grant or other innovations, we can help people
better leverage the money they have. Particularly when seen in contrast with the current debt-dependent financial aid
system that results from our reliance on student loans, 

the superior economic position students could secure through
accumulation of positive financial assets in a CSA—capitalized with their own savings effort and the adequate
transfer of public resources from repurposed Pell Grants and other sources—

becomes evident. With the potential for
improved outcomes on a variety of indicators across a child’s lifespan, pivoting to asset-empowered financial aid is
a policy move worthy of the significant political lift it would require.
As American college graduates encounter an increasingly globalized economy, U.S. higher education policies need
to go beyond focusing on how to increase college enrollment and even graduation. They must turn to enhancing
opportunities for students to increase their expectations related to educational achievement and for their families to
prepare financially in advance of college. 

We also must consider whether our policies place college graduates in a
strong position to succeed financially as young adults.
CSAs may be a way to make progress on all of these goals and maximize the benefit of going to college. For
example, post-secondary debt reduces the return borrowers receive on their educational investment. Having assets
may help to eliminate the student debt burden on students and their families, and thus increase the value of a college
education. In addition, if CSAs correlate with better student engagement at an early age, saving may allow them to
take full advantage of the primary and secondary education they receive and position them for greater college
achievement. Given the relationship between engagement and academic attainment, the prospect of affecting
children’s orientation toward their education for relatively small initial investments deserves greater attention. Also,

 if savings is a gateway financial instrument that leads to greater asset accumulation in other vehicles, children may
be more likely as adults to maximize the financial benefit of having a college degree. While more research is needed
to determine the precise mechanisms through which to realize the potential outcomes evidence suggests are
associated with Children’s Savings Accounts, in order to inform policy development, on balance,

 it seems clear that
there are real advantages to reshaping our financial aid system from one that hinges on students’ willingness to
borrow—sometimes fairly recklessly—to one that invites families to partner with government to prepare in advance
for their futures. 

Certainly a model that builds on CSAs conveys greater hope that, through expenditure of
considerable effort, children can achieve the dreams they and their families forge. Such a promise is the core of the
American Dream and a force demonstrably potent enough to carry this generation forward.

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