Statesman Op-ed on Pilot Program

Some of you may remember an announcement we made a few months back concerning the change in how coaches like you can address college savings. Coaches are now able to introduce and even assist with the application for a Texas 529 plan. With more freedom to connect your clients to a valuable savings tool, families in a good position to make this investment will have better access to help. This change is due to findings from our (and other Texas nonprofits') Child Support for College pilot program, which you may have heard a little more about through our Blog Competition Runner-up.

Below is a recent op-ed piece in the Austin American Statesman that gives a nice summary of the program, its outcome, and the reasons why it's important. Take a look! (And for the full report on the findings of the program, follow this link).

Annibale, Widrow: How a small rule change made Texas 529 college savings plans more inclusive

By 

CFED

 on April 24, 2014 4:09 PM | Permalink

Austin American Statesman
By: Bob Annibale, Woody Widrow
April 23, 2014

Research has shown that college savings accounts are critically important to promoting higher college enrollment. A child whose family has saved $500 or more toward college is about seven times more likely to attend college than a child with no savings account. Over the long term, a college degree has a dramatic impact on a person's earning capacity. A Texas community college graduate earns, on average, $240,000 more than a high school graduate over a lifetime; a four-year college graduate earns $790,000 more.

Yet many low- and moderate-income Texans lack easy access to college savings accounts, and they struggle with finding free and independent financial advice. Although 529 programs have no eligibility requirements based on income, research indicates that only 5.4 percent of 529 account holders in Texas earn less than $50,000. Nationally, the median income for families with 529 accounts is $142,000, about three times higher than those without the plans.
Now thanks to a little-heralded rule change by the Texas State Securities Board in February, low-income Texans will be able to take advantage of assistance from nonprofit financial coaches and counselors to better navigate savings plans applications, including the tax-advantaged 529 plans sponsored by the state.

The rule change is important to bolster Texas' growing efforts to promote greater college enrollment among low- and moderate-income populations. Enrolling in the Texas Tuition Promise Fund, one of the state tax-advantaged 529 programs, enables low-income families to take full advantage of the Texas Save and Match Program, administered by the Texas Match the Promise Foundation.

For a group of low-income single-parent families who participated in the innovative pilot program that led to the rule change, the implications are especially important.

More than 100 single-parent families took part in the Child Support for College Program, an 18-month pilot program where custodial parents were encouraged to deposit child support payments into 529 Texas college savings plans. Until the regulation was rewritten, nonprofit financial coaches involved in the program were prohibited from advising the families on the state's 529 programs because most of them were not registered financial planners in Texas. RAISE Texas, a statewide asset-building coalition, worked with the Texas State Securities Board to address this anomaly.

While college savings accounts may not be the panacea for ensuring that all Texas high school graduates have the funds to complete college, they do help families to begin the financial process, along with the educational preparations and expectations, for completing further education. Thanks to the families that participated in the pilot program, low-income parents in Texas have a better shot of saving to send their kids to college. Easier access to 529 accounts and more readily available financial coaching advice are invaluable tools for funding their educational goals. They also are major stepping stones in ensuring the state's college savings efforts are both accessible and inclusive.

Annibale is global director of community development and microfinance for Citi. Widrow is executive director of RAISE Texas.

http://www.mystatesman.com/news/news/opinion/annibale-widrow-how-a-small-rule-change-made-texas/nfgMT/

Hiccups

by Lauren P.

I remember when I was scheduled for my very first client session; I made sure I had pens, pencils, erasers, scratch paper, reference documents and was well versed in everything I had been taught in training. I arrived about half a day early, scanned through the office supplies, and watched the door patiently—only to be no-showed. Being prepared for that, I lost my jitters, and was able to carry my enthusiasm over to my second scheduled appointment about a week later. This one was legit.

She’s a kind woman with a difficult story: her husband is disabled, her son is deaf, she works a full-time job while taking on the role of primary care-giver, and is drowning in debt. After reviewing her situation on that first day, we decided that taking care of one of her Pay Day Loans would be the best way to start. We took the necessary steps to enter her into a program that protected her from the outrageous interest rates that pollute Pay Day Loans, and she would make reasonable payments from then on (Editor’s note: this client has almost paid back her Fresh Start Loan in full!).

Great, I thought – go me! I totally helped this woman out. Well, in our second meeting, I realized it’s not that easy. Yes we tackled a large, money-sucking monster, but that wasn’t the only issue she faced. She was also having a hard time paying her energy bill. Riding the euphoric wave from our last success, I approached this challenge with the same optimism. We would review her financials, create a budget, and methodically pay off her energy bill. Right? Not right.

After extensively reviewing her income, expenses, debts, and cash flow, neither of us could see a solution. Over the course of our hour together, we discussed possible cut-backs, forms of additional income, and what realistic options we could find. But no matter where we looked, there didn’t seem to be a fix that would fit her family’s situation. At the end of our meeting, I knew I had failed her; we hadn’t come up with an answer. She left with an energy bill that, on paper, was not going to get paid.

Editor's caption: the paradox of coaching!

Despite my lack of solution-generating ability during that meeting, she scheduled another one with me. When we sat down, I asked about the energy bill and how things had turned out. She relayed that it had been paid in full by a local church that often reaches out to people who are struggling. Wow. I would have argued with a psychic that her bill wasn’t getting paid, but I was so happy to see that she was a resourceful woman. It reminded me that we were in a partnership, and when one of us struggled, the other could buckle down and pull through. Well anyway, great – another hurdle jumped! Now how to pay the energy bill for this month? (Deflation).

This woman and I have met over six times, and I have become fully invested in her successes. I realized quickly that success will be measured from week to week, because I know that once we tackle a problem, there is another one right behind it. Financial debt is not a game. It’s not easy. It’s not trivial. It consumes your thoughts, influences your quality of life, and takes years to remedy. Meeting with this woman and others has taught me an extremely valuable and rewarding lesson: nothing is fixed with just one patch. While it’s important to celebrate small successes, you can’t lose sight of the ultimate goal. Persistence can move mountains.

The Love of Money

by Matt D.

I realize that I’m in a unique position as a volunteer of the Child Support for College program, but my most rewarding moments with clients have been opening college savings accounts for single mothers.

The first time I met with a client who was inclined to open an account for her child, I was quite conflicted.  I know the importance of a college education, but rationally and numerically, I thought it best to place emphasis on other priorities – like paying off debt and establishing emergency funds. She did have a job but was squeaking by. Just to make a small opening deposit would have been tough on her budget. Not to mention that in my professional practice, I advise prioritizing retirement over college education (there are no loans, grants, or scholarships for retirement). And besides, I knew that Mom’s $100 might only buy one textbook when it came time to use it.

 (Editor’s note: Every dollar counts! According to a recent study, “A low- and moderate-income child who has school savings of $1 to $499 prior to reaching college age is over three times more likely to enroll in college and four times more likely to graduate from college than a child with no savings account.”1).

When she kept pushing for the account, I didn’t exactly stand in her way, but I voiced my reservations. I told her about the plans that were available to her, but also mentioned the possibility of putting this money elsewhere, where it might make a bigger impact down the line. But Mom remained steadfastly committed to a college account, and while the numbers still never convinced me, seeing the commitment she had to giving her daughter a head-start was an eye-opener. Giving her daughter this account, no matter what the amount, meant a lot to her. She didn’t want her daughter to squeak by, but to get the education that Mom hadn’t been able to get.

With my first client, I learned that value isn’t only numerical.  The money might not have been the key to her daughter’s success, but there is an emotional component that often matters just as much, and in this case, more than the numbers.  These moms were eager to do something, anything, to set aside college funds for their children.  So, they did, and I was able to help them.  As I met with more of these single mothers, I changed from being hesitant (even discouraging) to open such accounts to eager. Each of them left the office with smiles on their faces and true senses of satisfaction.  These mothers had given children gifts for their future – small in number, but huge in significance.

1. Elliott, W., Song, Hyun-a, & Nam, I. (2013). Small-dollar children’s saving accounts and children’s college outcomes by income level. Children and Youth Services Review, 35 (3), p. 560-571.

Excerpts from the contest: honorable mentions!

While they weren’t our grand winners, some of our coaches brought up moments that were worth sharing. Here are some excerpts from coaches’ blog entries that seemed to be representative of the experiences we see as coaches. Take a look at what your fellow coaches had to say!

Here, a coach gets to the heart of the matter:
Rob S.
“Money does not solve the problem or even create the problem. Money is simply a tool used during our day-to-day lives...As a coach, it is important to share the tools we have available, but it is just important to spend the time listening and coaching or clients on personal habits that impact their financial solution. Habits and ideals must change for lasting financial success.”

Here, a mini-story about habit change:
Elsa D.
“Chloe spent over $150 dollars at Wal-Mart in 1-wk on things she admitted she didn’t really need: snacks so her son won’t cry while shopping, things for her fingernails, on and on. We were on the right track, because Chloe was acknowledging her bad habits. Similarly, the husband went to a check-cashing store every payday because he wanted to see the money he earned. This led to a long explanation about the money he was not seeing, the money he would save if he opened a checking and savings account. I suggested that he deposit his paycheck into a checking account, and save the amount that he'd been spending at the check-casher. For both of them, it did not take a lot of extra effort, but simpsimple, habit-forming tasks that would allow them to save.”

And here, a coach realizes the power of empowerment:
Larry G.

“I was almost finished with the first session, but we hadn’t accomplished enough. Yes, we knew the items on her credit report, and yes, she had an idea of how to get started, but I could still see that this information hadn’t connected with her yet. I wanted to explain to her how important would be down the road when she decided they were stable enough to buy that new car, or go back to school, or even buy a home. But instead of telling her these things that she already knew, I asked her what she intended to do about it.”

Stay tuned for more coaching blog fun!

Curse of the Shiny Object

I have a client—let’s call her Sue—who was locked in battle with a formidable but conquerable opponent: medical bills. The problem was that Sue was never one to get behind on bills, and when her son broke his arm, she paid a lot of the bills in full (yikes!) at the expense of her mortgage, on which she then fell quickly behind. Luckily, she had a steady income, so it was a comfort to know that her problem had a simple (if stressful) solution. She just needed to cut back, track her spending, and weather this storm with patience and planning. In a few months, Sue could be back on track and ready to start saving. But after the first meeting, I wasn't so convinced that she had the drive to do it.

I’m sure that “steady income” alone has made some of you jealous. In my experience with clients, this is often the deciding factor in whether or not a coach will be able to help a client make progress. So to hear that Sue had a steady income was exciting for me, because I consider myself a problem solver. I like to experience new challenges and unfamiliar territories, because that’s what fuels my curiosity in life.

Unfortunately, that curiosity comes with a curse: the Curse of the Shiny Object (AKA a short attention span). When a problem pops up, I want to solve it—right here and now, before it floats away on the breeze. So when it comes to coaching, I run into problems with my patience and focus. That’s not to say that I’m a bad listener. I always work to hear my clients out, empathize, and find myself asking good, leading questions (after all, I've been through training over a dozen times by now). Where I run into problems is in taking all the information they've given me, and narrowing down my focus onto a few manageable pieces. When we touched upon the idea of a budget, I started a budget. While working on the budget, we ran into student loan payments, and I switched gears into debt prioritization. When we entered her interest rates, I suddenly wanted to know what her credit situation looked like. Sue tuned out, and for good reason. I had the skills to lead her to water, but when I didn't slow down to prioritize and focus, she assumed that she needed to drink the whole lake.

When we met for her next appointment, she was quick to let me know that she “didn't do any of that stuff we talked about last time.” I asked why, and she told me what I should have known: “There was just too much to look at.” Since she was kind enough to identify where we went wrong, it was easy to correct it, and in that second meeting we made an emergency budget to get her through to the next meeting, for which she’d be bringing bills and a list of her debts. I realized quickly that Sue was a very driven woman, but she needed someone to help her map out a plan and hold her accountable. I needed to be her focus, so that she could worry about doing the work.

I know it sounds so basic, but it really dawned on me that in the hour we meet with our client, we are seeing just a brief glimpse of what composes their life. While it might seem like they’re presenting us a dozen different problems, that doesn't mean we need to solve them all at once. As with habit-change, even the most basic tasks take time and effort to accomplish. As a coach, it’s my job to make the process as simple and logical as possible. I’m now happy to report that Sue is nearly caught up on her mortgage, and is still waiting on a large tax refund. I’m also happy to report that the tax refund is the only item on our agenda for the next meeting, as we allocate it one account at a time.

The need for emergency savings

With the opening of our Safety Net Savings program, we want to take this month to focus in on savings, and how important it is in establishing stability and avoiding financial catastrophe. Just yesterday, I caught myself saying the type of phrase that leads directly into an emergency: "I don't foresee any trouble on the horizon." But what would happen if you ran into a large medical expense? What would happen if you lost your job? What if your car breaks down? What if etc? It might be easy for some of us to say that everything would be fine, but statistically, approximately half of us have insufficient savings to weather the storm(3). So when those emergencies inevitably occur, what options do our clients have?

If for some reason you don't believe how hard it can be, we dare you to test your financial survival skills! 

While it would be great to have a support system of family and friends that is both willing and able to help, that support is a luxury that many people don't have. Instead, many turn to other sources of liquid assets, such as personal savings, early withdrawal from investments, and the sale or pawn of their possessions. Others find their way into debt, relying on credit cards, or payday and title loans, to keep them afloat. Those who do have assets might find their way through unemployment through a mortgage refinance or a home equity line of credit, jeopardizing what security they do have(3). Of those who do take out payday loans, 16% are forced to do so because of an unexpected expense(1). Those of you who have seen enough clients will know by now that the bills accompanying the crisis often go unpaid, ending up in collections where they drag down credit scores and haunt clients for years to come.

As a rule of thumb, emergency savings accounts would ideally have enough money for a family to survive for three months without a source of income. In Texas, the roughly 27% of families in asset poverty are two to three times less likely to weather the rainy days without incurring some form of debt. It's easy to see the negative effects of not having savings, but there’s also a positive correlation between savings and generational income—if the parents in a low-income household had high savings, there’s only a 33% chance that the child will remain in the bottom quartile, as opposed to the 50% of children who come from households with low savings(3). 

Knowing that savings can lead to greater financial stability, as well as safeguard against potential disaster, we're hoping all coaches will encourage their clients to save for the unexpected, and take a look at what it takes to set up an account. Just as we set our goals for an unknown future, we still need to take those first steps toward progress. We all need a safety net sometimes!

Sources:

1. http://www.pewstates.org/uploadedFiles/PCS_Assets/2012/Pew_Payday_Lending_Report.pdf
2. http://www.pewstates.org/uploadedFiles/PCS_Assets/2013/EMP_Report_Hard_Choices_Navigating_the_Economic_Shock_of_Unemployment.pdf
3. http://www.forabettertexas.org/images/EO_2012_10_RE_Savings.pdf

The times, they are a-changin Financial Programs!

There have been a lot of changes to the financial programs in the past months, and we wanted our coaches to know just what adjustments we've been making.

Express Matched Savings

Our Matched Savings program is now running an Express account for people who are ready to get their goals off the ground in the near-future. Funds available in the last year of our current grant will allow us to offer a year-long Express Matched Savings Program May 1, 2013 through May 30^th, 2014 (enrollment deadline October 15).  As opposed to the regular eligibility requirements for the program, applicants to the express program are not required to live on a Foundation Communities property or have a dependent, but will be required to have a letter of recommendation written on their behalf. The Express program is limited to applicants who are seeking higher education or the improvement/opening of a small business (no home-buyers), and must complete their education requirements on a shorter time-frame.

Because of the strict requirements for this year-long program, we are seeking participants who are serious about saving and using the funds for college or their business. Since we are not releasing this information on a large scale, we strongly encourage you to share this information with any students or entrepreneurs if they have demonstrated the ability to save, will be able to complete our education requirements, and are certain that they will be enrolled in school or have started their business by May 30^th, 2014. An overview and application materials are now in the resource drawer in the main coaching office.

Fresh Start Loan

The Fresh Start Loan Program has made some updates that are in line with what we have learned so far. 

• The requirement for employment income has been lifted.  Anyone with documentable income in the last 90 days is eligible, assuming they meet all the other qualifying criteria. 
• A client must have checks or be able to get checks to qualify.  This is the only form of payment Foundation Communities can accept (post-dated checks must be provided at the time of loan issue).  Collecting money orders has proven to be a large administrative burden that Foundation Communities does not have the capacity for.
• A client may be declined for a Fresh Start Loan if they owe Foundation Communities money through previous transactions, including residence at a housing property.

For those needing an refresher on all of the requirements, see the Fresh Start overview!  

Child Support for College

The incentives for the Child Support for College Program are more generous than they were when the program started.  Now, when a client opens a Texas College Savings Plan with the minimum $25, Foundation Communities deposits a $100 incentive.  Every $1 deposited beyond the initial $25 is matched with $1.  The maximum incentive that can be deposited in an account is $500.  The enrollment deadline is now August 21st, 2013 and all funds deposited by August 31^st, 2013 will be matched.  For all the details, visit the Child Support for College web page.

As always, if you have any questions or concerns, do not hesitate to get in contact with us. Thanks for reading!