This Innovative Matched Savings Model Makes More Students Stay in College

Assets for Independence (AFI), a federal program administered by the Administration for Children and Families at the US Dept. of Health and Human Services, enables low-income participants to save towards their dream of owning a home, starting a business or attending college. They do this through Individual Development Accounts (IDAs), in which participants save for one of these three assets and ultimately have their savings matched at the point of purchase through a combination of federal grant and non-federal matching funds. While this "dream program" has improved the financial lives of thousands of participants, those who've administered AFI projects recognize that there are often challenges to grant implementation, including raising the required non-federal funds to match the AFI grant, finding participants that are able and ready to save and creating a sustainable program.

Luckily, thanks to several fantastic AFI grantees, including Earn to Learn in Arizona, an innovative model has emerged for using IDAs to help students pay for and complete college. This model works by using the college's scholarship funds to match federal grant dollars; these funds, combined, go to match student savings at a rate of eight to one (resulting in up to $4,000 matched for $500 saved). This approach has been met with astounding success: Earn to Learn alone has enrolled roughly 1,000 student-savers and, most impressively, these students are persisting at rates of over 90%. Additionally, this approach will decrease debt burdens faced by students through narrowing the gap in unmet student need; if a student participates in this model during four years of school, they will have received $16,000 in funds to match their $2,000 of savings.

This model addresses three of the major common challenges faced by AFI grantees:

  • The critical non-federal match requirement can come in the form of already-present scholarship or other financial aid dollars earmarked for low-income students. Colleges love this approach, because they are effectively able to nearly double scholarship dollars when combined with an AFI grant. All of these funds end up being paid to the college through tuition and/or fees.
  • Higher education institutions, both two-year and four-year, have large pools of low-income students that have earned income, such as through work study, and are well-positioned to save. This can help AFI grantees that are struggling to find savers that are ready to participate in an IDA. These grantees should consider partnering with the financial aid offices at their local community colleges and universities.
  • With a pool of savings-ready students, AFI grantees working with colleges can develop sustainable programs. For example, Earn to Learn, applies for a new grant with each partner college every year, the highest frequency allowed by AFI. They are then able to serve the same students through different grants during each year of their students' attendance. This volume of grants allows them to receive additional administrative funds to support their IDA program delivery.

Stay tuned to learn more about these promising solutions. Prosperity Now is developing a case study of Earn to Learn's AFI project model that will detail how the program was set up, operates and takes advantage of the efficiencies and scale of this sustainable, innovative model.

Amy Shir is an asset-building consultant.

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