Child Support for College Initiative
The goal of the Child Support for College initiative was to encourage long-term economic success for families in the child support system by assisting custodial parents receiving child support through the Office of the Attorney General – Child Support Division in opening a college savings account to pay for their child’s future educational expenses and providing access to financial coaches. This project was the first of its kind in the country!
The Child Support for College (CS4C) initiative combined the efforts of RAISE (Resources, Assets, Investments, Savings, Education) Texas, three local nonprofit financial coaching entities (based in Austin, College Station/Bryan, and San Antonio) and the Texas Attorney General – Child Support Division (CSD) to help families in the child support system save for their children’s college education. With financial support from Citi, RAISE Texas provided three local nonprofit financial coaching entities with a grant to increase their capacity for services and provide an incentive for parents to save for their children’s future educational expenses.
The CS4C initiative used the receipt of a lump sum child support payment to encourage savings and link parents to financial coaching services. Lump sum payments occur when a noncustodial parent makes a large “catch-up” payment to the child support system on arrears owed to the custodial parent. The Child Support Division collects lump sums through their enforcement processes, which can be court ordered, intercepted from the IRS in the case of tax returns or through the liquidation of seized assets. When this action occurs, custodial parents receive large, unexpected payments - often several thousand dollars. Based on estimates from the Child Support Division, lump sum payments can range from a hundred dollars to a hundred and fifty thousand dollars; the average lump sum payment for August 2011 was $2,444. Using the receipt of these funds as an important moment to discuss financial planning, the CS4C initiative provided parents receiving a payment the opportunity to meet with a financial coach to help them maximize the payment and save a portion of it for their child’s future educational expenses. This strategy has proved successful in promoting savings and integration into mainstream financial services for those receiving free tax preparation services.
In an effort to promote savings, parents receiving a lump sum payment who choose to open/ save into a Texas 529 college savings account were eligible for two matched savings opportunities based on their savings behaviors. The first incentive, based on the initial deposit into the college savings account, aimed to encourage enrollment and the savings of the lump sum payment. A secondary incentive rewarded the development of a savings pattern during the first year of account ownership. Participants were required to meet with a financial coach a minimum of three times to be eligible for the initial matched savings and one additional time for the second savings match.
The initiative began recruitment February 2012 and ran through August 31, 2013. Final incentive payments were disbursed by September 2013.
Final Report and Findings
Eligible participants will be custodial parents living in the designated counties who receive lump sum child support payments exceeding their regular child support payments. Child support customers with large balances on their Texas Debit Card (child support payment card) or other financial means will also be eligible for the program; however, this population will not be formally targeted in recruitment procedures. Participating parents must agree that their intent is to use the program to help save for their children’s post-secondary educational expenses. While there is no income threshold for participation in the program, the target population for this program is the estimated 134,000 families living in the three areas receiving child support considered of low- or moderate-income. Demographic data will be collected on program enrollees to determine the participation profile. The three designated areas for program eligibility are as follows: Austin – any custodial parent living in Travis County Bryan/ College Station – any custodial parent living in Brazos, Burleson, Grimes, Lee, Leon, Madison, Robertson, Walker, or Washington County San Antonio – any custodial parent living in Bexar County
CS4C Program Recruitment
The Office of the Attorney General – Child Support Division (CSD) will lead recruitment efforts. At the beginning of the CS4C program, a notice of the program and eligibility procedures will be distributed to parents in the three target areas. Every two weeks after the initial notice, CSD staff within the Family Initiatives Section will contact the parents who received a lump sum payment in the previous two week. Recruitment will continue until the program meets capacity.
The notification from CSD will provide the parent with information about program eligibility criteria, enrollment process and participant expectations. Additionally, it will direct parents interested in participation to contact the local service provider directly.
CSD will meet with local child support office managers in each of the three target areas to explain the program and encourage program recruitment. Materials will be distributed through local CSD offices to custodial parents. Regional CSD call center staff will receive a short script to facilitate handling calls regarding this program.
A financial incentive is provided to CS4C program participants, based on the amount of money they save in their account. The incentive will be deposited directly into the Texas 529 college savings plan account chosen by the parent. Financial coaches and RAISE Texas will oversee the deposit of the incentive and verify eligibility for the incentive based on program criteria. The available incentives will reflect the following criteria: every participant that opens an accontivesunt with a minimum of $25 is eligible for a $100 contribution. Contributions made before November 30, 2012 are eligible for a 20% match up to the maximum match limit of $400. All deposits made between December 1, 2012 and August 31, 2013 are eligible for a 1:1 match up to the maximum match limit of $400. The total incentive amount cannot exceed $500.
By maximizing the program with both savings and incentives, a participant could have $3,000 ($2,500 in savings and $500 in matching funds) in a college savings account after one year. For instance, under the Texas Tuition Promise Fund option for 2012 this program has the potential to provide support for an individual to prepay for 1.5 years at a community college (i.e. an Associate's Degree).
Incentives can be claimed through completion of the Incentive Claim Form two times during the project - November 30, 2012 and August 31, 2013. The total amount of incentive, despite the number of times incentive is claimed, cannot exceed $500.
Experienced nonprofit providers at the three program sites will provide financial coaching. The financial coach will work with the custodial parents one-on-one over multiple sessions to work on specific financial concerns and goals related to their family’s financial future and their children’s educational opportunities. Program participants are not required to meet with a financial coach, but it is highly recommended to sit down with the coach to discuss topics that may include the following: Developing spending/savings plans (not excluding budgeting, benefits screening and the encouragement of savings habits) Using of mainstream financial services Setting and achieving financial goals (i.e. homeownership, college savings, retirement).
The intent of the program is to provide financial coaching and encourage individuals to save for their children’s future educational opportunities; the savings vehicle must reflect these two intentions. The eligible savings vehicle for the incentive in this program is a designated Texas 529-college savings account. The financial coach will provide information on multiple savings vehicles and will not recommend or advise use of the Texas 529 plan in accordance with state securities laws. Parents choosing to use the Texas 529 college savings account will be eligible. Certified financial advisors will be available by phone to provide information about investment options with the 529 plan.
There are two types of college savings accounts available in Texas. The prepaid Texas Tuition Promise Fund allows parents to purchase credits to be used for the future costs of college tuition. The credits are purchased at the present day tuition costs, thus providing a significant savings for future college costs. The more traditional Texas College Savings Plan allows parents to contribute into an investment account that will grow tax-free. The Texas Office of the Comptroller of Public Accounts oversees both plans. All money saved in a Texas 529 college saving plan by a Texas resident is exempt from asset tests on state public benefits eligibility – TANF, Medicaid (parent and child), CHIP, and SNAP.
RAISE Texas will be the lead program administrator and serve as the fiscal agent with the three local partners, including all training, contract oversight and financial matters.
CSD will assist RAISE Texas in training local partner staff on the program components and providing information on related child support processes. Evaluation: A program evaluation will be conducted by staff at the LBJ School of Public Affairs to determine the following: