Washington State University Will Offer Student Savings Program With Up to 400% Interest
Posted By Donna Fuscaldo on December 7, 2015 at 2:51 pm
Finding ways to make college more affordable isn’t only a government effort. Schools around the country are coming up with unique ways to help their enrolled students pay for their college education, which usually means scholarships, grants or loan forgiveness programs. One school, Washington State University has adopted a unique approach to the problem. Offering some students the ability to save for college expenses with an up to 400% percent interest rate.
“It’s basically an effort to find ways to help students avoid that barrier that is finances,” says Todd Mordhost, a spokesman for Washington State University. “It’s a struggle for a lot of students, especially low-income students in reaching that goal of graduating.”
Schools try to find ways to make college more affordable
For many would-be students around the nation, their college aspirations are quickly dashed because of the exorbitant cost to attend a four-year school. According to the College Board, tuition for a year at an in-state school cost $9,410 for the 2015-2016 school year and $32,405 a year at a private not-for-profit institution in the 2015-2016 school year. Multiply that by four, or even five years, and students are paying thousands upon thousands of dollars to get a degree.
That, in turn, has created a huge student loan debt problem, which currently stands at $1.3 trillion dollars, surpassing auto loans, credit card and home equity debt, and second only to mortgages. Not to mention many students are coming out of college with degrees that can’t even get them an entry-level job, and if they are lucky enough to find work, often, it isn’t enough to cover their student loan debt.
Currently, the student loan default rate is at 11.8 percent and many college students are opting to ignore their debt altogether. But doing that can have major ramifications in their ability to buy homes, purchase cars or even take certain jobs. The people who are paying back their student loans, are putting off homeownership, starting a family and saving for retirement as a result.
Even students who come up with the money to attend college are struggling, with many dropping out before completing their degree program. The disparity between wealthy students and low-income students is greatest when it comes to attendance and graduation completion rates. The University of Pennsylvania’s Alliance for Higher Education and Democracy published a report in February that found in 2013, 77% of adults from families that were in the top income bracket earned a bachelor’s degree or higher by the time they turned 24. That’s up 40% from 1970. Yet only 9% of people in the lowest income bracket earned a bachelor’s degree or higher in 2013, up only 6% from 1970.
Washington State program only available to 85 students per year
Recognizing the struggles of low-income students, Washington State University recently announced its savings program. Starting in early 2016, more than 400 currently enrolled Washington State University students will have the chance to open up a savings account with an interest rate of up to 400 percent and apply funds from the account toward educational expenses at the university, whether that’s tuition, books, supplies or equipment required for courses.
Under the program, students who save $1,000 through the year will receive $4,000 in matching funds as well as academic support and financial literacy education. Currently, the program is open to 425 students over five years, which breaks down to 85 students a year.
Participants must complete the academic year in good standing and are required to complete financial aid and financial literacy requirements, including participation in SALT, a program available in 259 participating schools that provides students with financial education, counseling, job and scholarship support and tools during and after college. Washington State University is able to offer this to some students because of an Assets for Independence grant from the government, says Mordhorst.
Arizona Board of Regents offers 8-to-1 match
Washington State University isn’t the first college to offer a matching program. Arizona Board of Regents, the University of Arizona, Arizona State University and Northern Arizona University offer students an 8-to-1 match on their savings for tuition costs at one of the three schools.
Students who save $500 will receive $4,000. The maximum match a student can receive through the program is $4,000 a year. The target audience for the program is future college students and their families with annual incomes less than 200% of the federal poverty level. The schools pointed out when announcing the program that college participation among Arizona’s low-income families is “significantly” below the national average.
The application for the new savings program at Washington State University isn’t set up yet, but Mordhorst says the school is currently looking for a program coordinator who will create the application process. Even without it being formalized, the response from students and parents has been “tremendous,” he says. “It’s a great model. Obviously 85 students out of 4,000 freshmen isn’t a huge percentage, but we think it will have a tremendous impact on those 85 students,” says Mordhorst. “The hope is to expand it if we get more grant money.”