POLICY BRIEF - State-Sponsored Child Investment Accounts Helping Parents Save for College, Helping Students Avoid Loan Debt - December 2021

Oct 15, 2026

POLICY BRIEF examines state-sponsored child investment accounts (SCIAs) as a strategy to reduce college affordability barriers and prevent student loan debt. It highlights rising public college tuition and overall college costs, alongside rapid growth in student loan balances. Against the backdrop of loan forgiveness efforts, it argues the most reliable relief is avoiding borrowing. The brief explains SCIAs’ connection to 529 plans and contrasts related state approaches targeting early-childhood saving incentives.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages28

Reading Time1 h 11 min

AccessFree to download

Introduction

Rising college costs and student debt

Why prevent borrowing

What are SCIAs

Relationship to 529 plans

Program design and state variation

Incentivized college savings models

529 Plan

Sponsored Child Investment Accounts

Prepaid tuition

Education Savings Accounts

POLICY BRIEF State-Sponsored Child Investment Accounts Helping Parents Save for College, Helping Students Avoid Loan Debt Katy Clayton Brian Backstrom December 2021 ABOUT THE AUTHORS Katy Clayton is a graduate research assistant at the Rockefeller Institute of Government and is a candidate for a master’s degree in public administration with a concentration in education and social welfare policy atthe University at Albany Brian Backstrom is the director of education policy studies at the Rockefeller Institute of Government State-Sponsored Child Investment Accounts College tuition at public institutions across the country rose by 36.2 percent on average over the decade 2008-09 to 2018-19.1 The average total cost of college, accounting for all expenses such as room and board, across all institutions public and private grew by 22.4 percent.2 Students and their families are borrowing an enormous amount of money to pay for these costs: total student loan debt increased by 149.4 percent, from $577 billion to more than $1.4 trillion, over this same time period.3 Many proposals to forgive existing student loan debt have been proposed and such policies were prominent components of campaign platforms among Democratic candidates for the 2020 presidential nomination. Indeed, in his first eight months in office, President Joe Biden cancelled approximately $9.5 billion in outstanding student loan debt for more than a half-million borrowers,4 including students who attended institutions engaged in fraudulent practices,5 certain members of the armed forces,6 and severely disabled borrowers.7 Additionally, President Biden’s administration simplified and expanded programs for student loan forgiveness,8 and paused interest accrual and repayments on federal student loans during the COVID-19 pandemic.9 One of the surest ways to alleviate the burdens of student loan debt, however, is to avoid borrowing in the first place. Sponsored Child Investment Accounts (SCIAs), a relatively recent state innovation spreading rapidly across the country with bipartisan support, incentivizes parents to save for college costs with dual goals of stimulating college going and preventing students from incurring untenable levels of loan debt. These state initiatives focus on distinct populations, are supported by assorted funding sources, were created by different legislative approaches, and follow various administrative practices. Examining the programs and their particular strengths offers New York State the opportunity to build on best practices to construct its own successful SCIA initiative. State Incentives for Families to Save for College Sponsored Child Investment Accounts, sometimes referred to as Child Savings Accounts or Child Development Accounts, are investment programs specially designed to help young people and their families save funds to cover the future cost of college and career training programs.10 Most SCIAs are constructed as an extension of states’existing “529 Plan” college savings programs. These 529 Plans allow investments to grow tax free and funds can be used to cover qualified education expenses including college tuition, room and board, textbooks, student fees, and more.11 Incentivized College Savings Programs 529 Plan A state-run tax-advantaged investment plan designed to help families save and pay for college.(Some states, but not New York, expanded allowable expenses to include K-12 education and apprenticeship programs.) Investments grow tax deferred and withdrawals are tax free if they are used for qualified education expenses. Currently, 49 states and the District of Columbia offer some form of a 529 Plan. Sponsored Child Investment Accounts Typically, a 529 Plan account that is seeded by a deposit from the state or where a parent's initial deposit is matched by the state. These accounts may be established by the state on behalf of a young child, or the state may require a parent to set up an

FAQs

What problem does the brief address about college costs and student debt?

The brief highlights that tuition and total college costs have risen sharply and that student loan debt has grown rapidly over the same period.

Why does the brief emphasize preventing borrowing instead of relying on forgiveness?

It argues that loan forgiveness eases burdens for existing borrowers, but the surest relief is avoiding borrowing in the first place.

How are SCIAs related to 529 plans?

Most SCIAs are constructed as an extension of states’ existing 529 Plan college savings programs, using tax-advantaged investment growth for qualified education expenses.

Oct 15, 2026

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