Free $50 for college going unclaimed in poorer communities

Uptake in Lawrence 1% compared to 25% in Newton

IN THE TONY Boston suburb of Newton, with some of the best schools and highest high school graduation rates in the state, more than a quarter of the babies born the last two years already have college savings accounts in their names, seeded with $50 in public money from a program run by state Treasurer Deb Goldberg.

In Lawrence, a poor city that is heavily Latino and immigrant, where students are far less likely to graduate from high school, fewer than 1 percent of babies born since 2020 have those savings accounts.

That runs counter to the mission of the BabySteps program, which is open to every baby born in Massachusetts and was touted as a way to incentivize families of all income levels to start saving for college. Rather than helping those most in need, the program so far appears to help those who already have the knowledge and know-how to enroll. The fiscal 2023 budget now on Gov. Charlie Baker’s desk aims to address the problem by allocating $500,000 for BabySteps that must be used to “promote geographic, social, racial and economic equity” and reduce barriers to enrollment in low-income communities and communities of color.

BabySteps was launched in 2020, following smaller pilot programs that enrolled kindergarten and middle school students for savings accounts in a few cities. It was modeled after a similar program run by the Hildreth Stewart Charitable Foundation. Bob Hildreth, who founded the foundation, provided the initial seed money for BabySteps.

“It’s definitely true that we suffer from what all our savings programs suffer from. Low-income people don’t take advantage of it,” Hildreth said.

Under the program, every baby born or adopted in Massachusetts since 2020 has been eligible to have $50 given to them and deposited into a tax-advantaged post-secondary school savings account managed by Fidelity and overseen by MEFA, the Massachusetts Educational Financing Authority. Families can sign up by checking a box on the form they use to apply for their baby’s birth certificate, after which they will be sent the forms to enroll. No family matching money is required. The $50 is currently being paid with money from MEFA and Hildreth’s foundation. The money can be used for college, vocational school, or other advanced education.

As of July 15, 2022, there have been 18,581 accounts opened with $929,050.

According to statewide data provided by Goldberg’s office, 12.9 percent of families with babies born in 2020 and 11.9 percent of families with babies born in 2021 opened accounts, as of March 30, 2022. But those accounts are not distributed evenly across Massachusetts.

Among all cities with more than 500 babies born in those years, the cities that exceeded the state average both years were Somerville, Newton, Cambridge, Medford, Waltham, and Boston. All of those are highly educated Boston-area communities. In Somerville and Newton, more than a quarter of families took advantage of the program.

On the other hand, the economically struggling and lower educated Gateway Cities had far lower take-up rates. The families of fewer than 1 percent of babies born in Lawrence and Springfield opened savings accounts, as did fewer than 3 percent of families with babies in New Bedford, Brockton, Chelsea, Lynn, and Fall River. Other cities where few families opened accounts were Lowell, Revere, Taunton, Everett, and Worcester.

Hildreth said the reasons are complex, and similar to the reasons more parents don’t take advantage of federal financial aid or Boston’s school selection program. “Forms are often a problem,” Hildreth said. “But it goes deeper than that. The biggest thing of course is poverty. That quells ambition. You have systematic racism. All the different things that stop people from participating.”

Daphna Gluck, director of program evaluation for the Office of Economic Empowerment in the treasurer’s office, said that the whole point of children’s savings account programs is to help families who are lower income or have less experience with financial institutions open a savings account, since those families are less likely to open accounts on their own. Research shows that children with a college savings account are more likely to obtain higher education.

But Gluck acknowledged that it can be difficult to get lower income families to sign up. “Families may not have any experience with investments because they never had a chance to do that,” she said. The 529 college savings accounts come with tax benefits, but it is wealthier families with higher tax burdens who are more interested in those benefits.

Gluck said it can be challenging to convince families that there is a point to opening an account when they don’t have any extra money to put into it. “There’s a sell there that’s not always easy to make,” she said.

Gluck said there can also be a “trust barrier,” and families unfamiliar with the program could see it as a scam if someone asks them to provide personal information and open an account with a promise of free money.

Even if they are interested, families may become intimidated when they have to fill out the form to open an account, particularly when they are asked to choose an investment strategy. While the treasurer’s office provides marketing materials in multiple languages, the Fidelity website is in English only, although multi-lingual phone support is available.

Similar programs exist in Maine, Pennsylvania, Rhode Island, and in individual cities, including New York, San Francisco, and Providence.  A 2022 Brandeis University study found that more than 1 million children are enrolled in savings account programs in over 120 programs across the US. The Brandeis study found, however, that there are many barriers to signing up, particularly for low-income families. These include a lack of trust in institutions, a lack of access to financial services, language and literacy barriers, and inadequate communication between the program and families.

Gluck said the treasurer’s office is relying on community partners to form relationships with families. The Office of Economic Empowerment has done marketing campaigns, including social media campaigns in underserved communities. It has built relationships with community organizations – nonprofits, housing authorities, agencies that assist families with children – so those groups can encourage families to enroll. The office specifically targets programs like MassHealth or tax assistance sites, which serve lower income families.

Over the last few months, the office has worked with partners to create enrollment hubs – one each in Lawrence and Cambridge – where a financial coach can help families apply. It is working on establishing hubs in Springfield and Fall River.

The $500,000 budget earmark would be used for a one-to-one match, to use taxpayer money to leverage more private funds for the program, with the requirement that the money be used to promote equity. Hildreth has committed to matching $300,000. The amendment introducing the earmark was sponsored by Sen. Paul Feeney, a Foxborough Democrat who co-chairs the Committee on Financial Services.

Feeney said the treasurer’s office came to him and suggested that with an “influx in resources,” it would be better able to reach out to underserved areas. He said lawmakers were not prescriptive regarding what that outreach would look like. “We’ve been working with the treasurer to ensure they have resources to go out and do it. It’s up to them to do so,” Feeney said.

Asked whether there is a risk that the influx in money would simply go to more families in wealthy communities, Feeney said it is always a concern to make sure the money goes to those who need it most. “This is no different. But I don’t want to let perfect be the enemy of the good,” he said. “If we have a program that does families good, we need to do our job, educate people, let them know the program exists, get out there, and make it known so they can take advantage.”

Goldberg, in a statement, called the BabySteps Savings Plan an important resource.  “With this additional funding, we will be able to reach more people of color and support them in investing in their children’s future,” Goldberg said.

Already, there are efforts by organizations like La Colaborativa, a Chelsea community group, to promote the program. La Colaborativa executive director Gladys Vega said the group has not gotten state money, but has coordinated with Hildreth. Vega said if she sees a woman with a baby carriage in line for food assistance, she’ll ask about her family’s needs, then ask if she’s familiar with BabySteps.

Meet the Author

Shira Schoenberg

Reporter, CommonWealth

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

Vega said she must be careful how she asks people to set aside money in a post-pandemic environment where utilities are shutting off people’s service for $50 unpaid bills. “What we tell people about BabySteps is can you please take a look at the web page, learn about the program, try to sign up, and then you can figure out how can you put money into it,” Vega said.