Transforming 529s into Children's Savings Accounts (CSAs): The Promise Indiana Model
State 529 plans are tax-preferred vehicles for post-secondary education saving, administered by states, usually through contractual agreements with private financial institutions. In large part, 529s have served to intensify the distributional advantages that already accrue to more economically-privileged households. However, a small, but growing number of states are attempting to transform their 529 programs into Children’s Savings Accounts (CSAs) programs so that they better serve children and families disadvantaged economically and educationally. However, there has been little discussion about what might differentiate a CSA program administered through a 529 from a standard state 529 program. Using the case of Promise Indiana’s 529-based CSA as an example, this paper outlines what we believe to be some of the critical elements of Children’s Savings Accounts and the ways that they may help to change the distributional consequences of our current educational and economic systems, such that they facilitate, rather than frustrate, the aspirations of disadvantaged children. The paper traces the origins and evolutions of Promise Indiana, within a discussion of components of 529-based CSAs, identifies design features that align with Identity-Based Motivation, outlines the rationale for a wealth transfer within CSAs, and shares lessons for replication. The Promise Indiana’s model may be relevant in other parts of the country, particularly as communities consider how to address imperatives related to educational attainment gaps and rising student indebtedness, as well as their implications for upward mobility and broader prosperity.