Parents who want to pay for their kids to attend college are usually told to begin saving money as soon as possible after the child is born.
A proposal discussed Thursday by the House Children and Families Finance and Policy Committee would put that advice into law by opening savings accounts for all newborn Minnesotans as early as next year.
Sponsored by Rep. Carlie Kotyza-Witthuhn (DFL-Eden Prairie), HF2864 would establish the Minnesota Kids Investment and Development Savings Act, a statewide children’s savings account program to help them pay for higher education or other post-secondary training.
The bill would appropriate $11.72 million during the upcoming biennium, followed by an $8.15 million base appropriation beginning in fiscal year 2026, to the “MinneKIDS” program, with the goal of beginning it by July 1, 2024.
The committee laid the bill over, as amended, for possible omnibus bill inclusion.
Kotyza-Witthuhn said data has shown that children with just $500 in a savings account when they graduate from high school are three times more likely to attend college or pursue other secondary education, and four times more likely to graduate.
“It can really make a big difference,” she said.
A local partner grant program would be established for grants to qualifying entities such as local and tribal governments as well as philanthropic and nonprofit organizations. The minimum grant amount would be $100,000 and take the form of start-up grants to establish local child savings account programs or expansion grants to grow existing programs.
How it would work
Using publicly available birth records and school enrollment data, the Department of Education would identify eligible children, who would then have a savings account opened for them.
Children born on or after July 1, 2024, who are Minnesota residents, would receive a $50 deposit, or a $100 deposit if they are from low-income households.
That money could then earn interest until the administrators receive documentation the child has enrolled at an institution of higher education or a business education program.
Then, per the bill: “The program administrator must make a payment to that institution or business education program in the amount of the seed deposit designated for the child … plus any investment earnings attributed to that amount since the date of the deposit, as calculated by the program administrator, for qualified higher education expenses associated with the child's attendance at that institution or business education program.”
Parents would be notified and given the option to opt out of the program, or make additional contributions to the account, when the child enters kindergarten.
Any funds not used before the beneficiary turns 26 years old would be forfeited and deposited back into the program.
Supporters say the program, based on pilot project started in St. Paul in 2020, could “jump start savings” for 70,000 Minnesota babies each year. CollegeBound St. Paul now has over 9,500 children enrolled in its program with over $1.1 million in savings.
A delete-everything amendment offered by Rep. Walter Hudson (R-Albertville) failed on a party-line vote. He said it would have simplified the process by having the state make the same deposits into existing, state-sponsored 529 college savings accounts, with the requirement that parents choose to participate.
“Opt-in is buy in, and buy in is what I believe translates to a pattern of behavior and values that’s going to improve the odds of these kids someday improving their lives by attending college and graduating,” he said.
Kotyza-Witthuhn said she is open to further discussion on the type of accounts that could be used, but requiring people to opt-in to the program would be a barrier for those who are either mistrustful of the financial system or don’t understand it.