Can a savings account determine college success? Perhaps. According to a recent study by the New America Foundation:

Children who have designated a portion of their savings for college are more likely to be on course than children with no savings holds true even when controlling for the influence of other important factors. A recent study to be published in the American Journal of Education finds that, when controlling for important factors including race, gender, academic achievement, parental education, household income and net worth, children with savings designated for college are twice as likely to be on course as children without savings designated for college.

Personal savings that can be used to help pay for college reduces the need for student loans, and is therefore likely to have effects on student college expectations like those of grants and scholarships.

This makes sense. College is expensive. Having a savings account makes college more attainable, because students have some money set aside to pay for college. In addition, the mere process of saving itself may make college look possible because it’s part of a goal with many steps, which the student is already taking, rather than just a vague accomplishment to attain in the future.

So far so good. But the policy implications of this are a little unclear. The paper is full of theories . There’s the “college-bound identity theory of savings effects” and the “identity-based motivation (IBM) theory,” but all we really know here is that people with college savings are more likely to attend and graduate from college. But is the existence of a college savings account a cause of college ambition, or a symptom of it? This seems to be a crucial question.

According to the paper:

“Does owning savings matter for low-income children?” The answer appears to be yes. The suggestion from recent research is that ownership of children’s savings accounts may be playing a role in current educational disparities. Given this, an important part of a strategy for promoting college attendance and graduation and helping to ensure education as the “great equalizer” in society may be to assure that all children own a savings account early in life with public deposits in these accounts.

The problem with this is that savings accounts may be a reflection of college goals, rather than a push toward college. The paper has, apparently, controlled for “race, gender, academic achievement, parental education, household income and net worth.” It hasn’t, however, controlled for parental ambition.

The paper suggests that just the existence of the savings account is enough to get many more poor children through college. What seems important to determine, however, is how much does it matter who creates the account and how much money has to be in that account?

It seems likely that parents who set up college savings accounts for their children are precisely the sort of parents most likely to push their children to get good grades, take the SATs, and apply for college. If a state or federal program creates the savings account, and regularly deposits money in that account, the children and parents still haven’t taken any initiative, and aren’t any more likely to push their children to take the other steps to get to college.

As the paper points out, however, part of the reason for the savings accounts is to reduce the amount of debt students have to assume. The possibility of debt is one of the major reasons the poor avoid higher education.

As long as we acknowledge that reality, however, and as long as we posit that it makes sense to “make public deposits in these [savings] accounts” wouldn’t it make sense to just skip the middleman? How about just making “public deposits” in higher education itself?

We can make vague statements about the ambition and goals of America’s poor, as far as college completion is concerned, but the number one reason students don’t complete college is that it’s is too expensive. That’s the problem; it’s not a lack of initiative with regard to setting up savings accounts. There’s no need for the poor to take on debt for college if greater public investment in college makes it cheaper. [Image via]

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer