A New Approach to Help Youth Aging Out of Foster Care
Fostering Independence Accounts can help foster children find their footing as they rise into adulthood.
By Dan Lips and Tim Keller
Executive summary
Each year, more than 23,000 children age out of foster care when they turn 18 or, for those who live in states that offer extended time in care, as late as 21. These children were unable to reunite with their biological parents and were never adopted by another family.
The state has an obligation to help these children find a safe, stable, and loving family. But many of them will leave foster care with little more than a trash bag full of clothes and their name on a housing waiting list. This paper encourages federal and state policymakers to recognize their role as surrogate parents to the teens and young adults in our nation’s foster system and provide them a modest, publicly funded spending account as they age out and are forced to step out into the world without a family to love, support, and guide them.
Children aging out of foster care enter adulthood with few of the safety nets typical teenagers may take for granted. These young adults often don’t have grandparents to give them a used car or a savvy cousin to help them navigate the college admissions process. Most importantly, children who age out typically do not have parents willing or able to help them financially when the rent is due, the refrigerator is empty, or the cell phone company threatens to shut off service.
As a result of these significant disadvantages, youth who age out
of foster care often succumb to poor life outcomes. They are significantly more likely to become homeless, unemployed, or incarcerated than the general population. Frighteningly, most human trafficking victims were formerly in foster care, according to multiple government estimates.
Assisting children who age out with the transition to adult independence has been a longstanding bipartisan goal of national and state policymakers. For example, Congress provides grants to states to provide support and services, such as housing assistance, to former foster youth. Congress also funds education and job training vouchers, worth up to $5,000 annually, for youth who age out of care. While these federally funded programs have benefitted older foster youth, we have not yet adequately addressed the hurdles facing foster youth who age out. Policymakers therefore need to consider new strategies for supporting the difficult transition to independence.
Most current policies deliver assistance to transition-age youth by providing non-cash benefits (housing assistance and healthcare), or to a caretaker (such as payments to an institutional care provider). A growing body of evidence indicates that direct cash assistance, without strings, is better at improving long-term outcomes for the poor and disadvantaged than traditional welfare programs that provide participants with services or that place strings on the financial assistance.
A new strategy would be to provide each young person aging out of foster care with a “Fostering Independence Account” (FIA). A FIA is essentially a cash account funded by the government for a period long enough to allow these young men and women to find their footing.
FIAs could be unrestricted cash deposits, similar to a universal basic income. Or policymakers could establish limits on how FIA funds could be spent, similar to the concept of Education Savings Accounts. If the latter approach were taken, allowable uses could include things like housing, food, utilities, clothing, and public transportation. In addition to a minimum level of funding, policymakers could also establish incentives to encourage older and former foster youth to practice behaviors linked with achieving independence, such as graduating from high school, completing a financial literacy course, participating in education or job training programs, or maintaining steady employment.
Congress can incentivize states to experiment with FIAs by allowing federal funds to offset the state cost of creating FIAs, thus building upon past bipartisan congressional efforts to ensure that youth aging out of foster care can achieve successful independence in adulthood. States could create and oversee FIAs, not only to help youth as they transition from state care to independent living, but as a means of maintaining a connection with these young adults. This would increase the likelihood they would take advantage of other services, such as federal education and job training vouchers, and avoid negative outcomes, such as homelessness, incarceration, or becoming a victim of trafficking.
Three key takeaways
- Youth who age out of foster care without a family to assist them face many challenges to achieve independence and are at higher risk of homelessness, incarceration, and becoming a victim of human trafficking.
- Fostering Independence Accounts would provide teens and young adults aging out of foster care with basic financial resources to support their transition from foster care to independent living. FIAs could be spent on allowed uses, such as food, housing, clothing, and transportation.
- Fostering Independence Accounts could provide financial incentives to older and former foster youth to achieve certain goals or milestones on their path to independence.
Key federal reforms could spur state action
To incentivize states to create Fostering Independence Accounts, Congress should expand the reimbursable uses of federal funds to allow states, territories, and tribal governments to pay for FIAs.
Congress should also revisit, revise, and reign in the all-too-common practice of state welfare agencies applying to the Social Security Administration to serve as the “representative payee” of youth in foster care and then using those youth’s Social Security benefits to reimburse the agency for the cost of foster care. One idea for reforming this practice would be to allow foster youth’s Social Security benefits to be deposited in a Fostering Independence Account to provide for the youth’s current and future needs.
States can act without federal reform
While changes in federal law would help incentivize the creation of Fostering Independence Accounts, states do not have to wait to enact, fund, and implement FIAs using state and local funds.
Youth aging out of foster care face significant challenges
Youth who age out of foster care face significant challenges in their transition to independent adulthood. As foster youth age, their case plans for leaving the system often change from reunification or adoption to emancipation from the foster care system, i.e., aging out. Each year, over 23,000 youth will exit our nation’s child welfare system without a permanent family, thus finding themselves largely on their own.
Transitioning into adulthood is challenging for any teenager. Youth who age out of foster care lack the traditional social networks and safety nets that many teens (and adults) take for granted, such as a stable family backed by financial resources.
Often, youth in the foster care system have lived through multiple traumas and disruptive events by the time they begin their transition to adulthood. This can include abuse and/or neglect, multiple foster home placements, lack of continuity in education, and an array of losses of relation- ships (e.g., friends, family, and/or siblings).
Absent help from a trusted, caring parental figure or familial support structure, it is no wonder that youth who age out of foster care struggle to overcome the challenges they face and often succumb to poor life outcomes such as homelessness, young parenthood, unemployment, and incarceration.
These dismal life outcomes are not only individual tragedies, but also significant challenges for entire communities. The Annie E. Casey Foundation estimates that “citizens and communities are paying $300,000 in taxpayer-funded costs for every young person who ages out of foster care at 18.” One analysis estimated that youth who age out of the foster care system after spending four years of care without achieving permanency would result in a cost of $625,000 to society compared to the general population.
Two contrasting tales
Johnny’s story
Johnny met his future Mom when he was 16. He’d been in the foster care system for 13 years and lived in more than 40 placements. He needed someone to advocate for his education rights because he was way behind on credits. That’s where Brooke came in. She used her legal training to help him enforce his rights. She genuinely liked him. He reminded her of her younger adopted son. But she was shocked by his “graduation” plan: prison. To Johnny, prison’s regular meals, its GED program, and its predictable routine looked like a decent option.
Brooke is one of those people who just can’t seem to take the easy route. She did more than help Johnny with his school issues. She asked him to become her son. When he agreed, she adopted him. It was not smooth sailing. It was a storm-tossed sea crossing. But Brooke was determined that he would stay out of prison.
And stay out of prison he did. Today, Johnny is in the U.S. Army. He’s stable. He’s working hard. He’s been promoted. He has a place to call home when he’s on leave. It may sound like a storybook ending. It’s not.
There was as much sheer relief as joy and triumph at the Army processing station. And there are still challenges. But it is so much better than prison.
Unfortunately, too many foster children don’t have someone to step into their stream and put the wind in their sails. If those kids had a FIA waiting for them, perhaps more would confidently grab the helm and steer clear of activities that might lead to jail time.
Dominic’s Story
But not every foster child is lucky enough to find an advocate to help them transition to adulthood. Consider Dominic’s story.
Dominic spent eleven years bouncing between 80 different foster homes. When he turned 18, he found himself alone and homeless, and resorting to a life of crime. At 20, he found a home more permanent than any he’d known to that point, a correctional facility in the Midwest.
“I had plans for the future and I kind of ruined it,” he said from prison, when he was just one year into an eight-year sentence. “But how could I be a good kid with all the horrible things happening?”
Current federal policies to assist youth who age out
National policymakers recognize these challenges, which have been exacerbated during the COVID-19 pandemic, and have developed federal policies to encourage states to address them. “The federal government recognizes that foster youth may ultimately return to the care of the state as adults through the public welfare, criminal justice, or other systems,” writes Adrienne L. Fernandes-Alcantara with the Congressional Research Service. “In response, federal policy has focused on supporting youth while they are in foster care and in early adulthood.”
This is an overview of key federal policies focused on assisting older youth in or aging out of foster care.
COVID-19 relief funds
Most recently, as a part of the Consolidated Appropriations Act of 2021, Congress provided states with funds intended to provide immediate cash grants to youth who have aged out of the foster care system. As of this writing, implementation and compliance with the Act were ongoing. But Aysha Schomburg, the recently appointed associate commissioner of the federal Children’s Bureau, was quoted as saying, “Give young people the cash and trust them to make the decisions they need to make for their lives and their priorities. That’s my message.”
The Chafee Foster Care Independence Program
In 1999, Congress passed the John H. Chaffe Foster Care Independence Act, which updated the federal Independent Living Program established in 1985, authorized under Title IV-E of the Social Security Act. This Act “authorizes [federal] funds to be used for providing assistance in obtaining a high school diploma, career exploration, training in daily living skills, training in budgeting and financial management skills, and preventive health activities, among other purposes.” Moreover, “[s]tates must meet certain requirements, including that not more than 30% of Chafee funds are used for room and board expenses.” Youth in states that extend foster care to age 21 can be served under the Act until age 23.” The Act was later expanded to authorize and fund education and job training vouchers for youth aging out of care up to $5,000 annually for up to five years, until the age of 26. Funds are distributed to states, territories, and tribal areas.
Title IV-E of the Social Security Act
Since 1961, the federal government has distributed aid to states to support child welfare programs, including foster care. In 1980, Congress amended the Social Security Act to establish Title IV-E, which authorized a foster care and adoption assistance program. States, territories, and tribes are eligible for funding to reimburse eligible foster care costs, including maintenance payments, caseworker expenses, and other administrative costs. As you’d expect, these federal funds come with requirements for states, territories, and tribes to provide specific services to foster children.
The Fostering Connections to Success and Increasing Adoptions Act of 2008
This law aims to assist foster children’s transition to independence, including by allowing states, territories, and tribes to extend assistance and benefits to former children in foster care beyond age 18, under certain circumstances. Federal law requires that qualifying beneficiaries must meet certain guidelines, including pursuing secondary, postsecondary, job training instruction, or be employed, unless exempted for medical reasons. According to the Government Accountability Office, 26 states had extended foster care programs to serve older youth as of 2019.
The Preventing Sex Trafficking and Strengthening Families Act
In 2014, Congress passed a sex-trafficking-prevention law that included provisions intended to improve older foster youth’s transition to independence. The law required states to provide transitional planning for older youth and ensure they receive key documents, such as a birth certificate, Social Security Card, medical information, driver’s license, or state-issued ID.
Medicaid
Under the Patient Protection and Affordable Care Act of 2014, former foster youth are eligible for state Medicaid services until age 26.35
Education and workforce benefits
Current and former foster youth are also eligible for certain federal benefits provided by the Department of Education or the Department of Labor. For example, foster children are eligible for assistance under the TRIO programs of the federal Higher Education Act, which “identify potential postsecondary students from disadvantaged backgrounds, prepare these students for higher education, provide certain support services to them while they are in college, and train individuals who provide these services.” DOL’s Workforce Innovation and Opportunity Act (WIOA) authorizes two programs, Youth Activities and Jobs Corps, which together “provide job training and related services to targeted low-income vulnerable populations, including foster youth.”
Housing benefits
Former foster youth are also eligible for federal housing assis- tance, most recently authorized by the Housing Opportunity Through Modernization Act, which provides subsidies for family reunification or housing vouchers for youth who aged out of foster care, up to age 24.
These federal laws were adopted with bipartisan support, demonstrating broad consensus that youth aging out of foster care need help to successfully achieve independence. However, even with these supports in place, former foster youth remain at serious risk for negative life outcomes as the evidence of poor life outcomes for many foster children shows. New and innovative approaches are necessary to give these young adults a fighting chance to successfully achieve independence.
Policy Recommendations
FIAs are one possible new approach to providing better supports to youth aging out of foster care.
1. Congress should expand the reimbursable uses of federal funds to allow states, territories, and tribal governments to fund Fostering Independence Accounts.
Consistent with the recent COVID-19 relief bill and other reforms that have granted states, territories, and tribes flexibility to extend foster care, Congress should amend
Title IV-E of the Social Security Act to authorize states to access federal funding to provide direct financial aid to individuals who will soon or who have already aged out of foster care by making such expenses reimbursable. This authority would allow states to prioritize direct aid to older foster youth. More than half of the states have extended foster care over the past decade, indicating a broad policy commitment to supporting older youth who will age out of care without a family to look to for support. Granting states additional flexibility to innovate in how they support former foster youth, including by direct payments, has the potential to address current gaps in support for and limit the negative outcomes of youth who age out of foster care.
2. Congress should reign in the practices of state child welfare agenices seeking appointment as the “representative payee” for youth in foster care and then reimbursing themselves for costs associated with the youth’s care.
In 2003, the U.S. Supreme Court ruled against foster youth whose Social Security benefits were being paid to the state as the “representative payee.” A representative payee is appointed when a Social Security recipient cannot manage or direct his or her own benefits. The duty of the representative payee is “to use the benefits to pay for the current and future needs of the beneficiary, and properly save any benefits not needed to meet current needs.” The Court held that allowing the appointment of a self-reimbursing representative payee is not “at odds” with the “Commissioner’s mandate to find that a beneficiary’s interest would be best served by the appointment.”
However, a recent investigation by NPR and The Marshall Project found this practice is rampant nationwide, raising questions about whether the Social Security Administration is making competent, case-by-case determinations of whether it is truly in a foster youth’s best interest to have a child welfare agency appointed as his or her representative payee — a representative that will reimburse itself for the costs of foster care and leave those foster youth without their Social Security benefits.
Congress should investigate this all-too-common practice and consider reforms that ensure individualized determinations are made for the appointment of representative payees and for ensuring that Social Security benefits are used and saved for the benefit of foster youth. One solution would allow Social Security benefits, or some portion of those benefits, to be deposited in a FIA to provide for the youth’s future needs.
3. States should establish Fostering Independence Accounts for older foster youth as they age out of the system.
Each child aging out of the foster care system should be provided with a publicly funded Fostering Independence Account. In his book, Out of Harm’s Way, Dr. Richard Gelles, Ph.D., proposed “Transition Accounts.” Dr. Gelles argued that successfully launching young adults “is dependent on parental support.” But in the case of youth who age out, they have no parental support. “In this case,” Gelles wrote, “the parent is the government, so the cost should be borne by the federal and state government.” And “while money is not a replace- ment for a stable and caring family . . . [p]roviding a stable and secure financial base is an important first policy step” to help resolve the issues facing youth who age out of care.
Establishing and funding FIAs would give older foster youth access to direct financial resources when they need it most.
They would serve a very practical purpose: Short on rent money? Check. Need a down payment on a car to get to work or school? Check. Work requires you to purchase a uniform? Check. A FIA gives recently emancipated or older foster youth the funds they need to survive and make their way as they exit or prepare to exit the foster care system.
A second purpose is more “preventative” than practical: to keep foster youth from running away and to incentivize them to remain in foster care if the state allows. One reason some youth leave foster care is to gain independence. The FIA concept asks these youth to hang on for just a little while more so they can access these funds and start building the future they want. FIAs could also incentivize youth to stay in care past their 18th birthday, where state law allows. The data tell us that kids who remain in care longer tend to do better in the long run. Any mechanism by which we can keep transition-age youth in care and engaged with caring adults will improve outcomes.
FIAs ask foster youth to stay on the radar screen, stay safe, and thereby have access to a spending account they can use to lay the foundation for their future.
Questions for policymakers to consider
Who should be eligible for a FIA?
There are several possibilities. All children in foster care at age 14 or older could be eligible to receive a FIA and start accruing funds each month. Or a youth could receive their FIA upon turning 18, whether they emancipate at that time or opt to stay in care (where allowed). The real keys to a successful FIA program will be adequate funding and properly equipping youth with financial literacy skills, such as budgeting, shopping strategies, learning to negotiate a major purchase, saving and investing, understanding how credit cards work and interest accrues, and how to read and understand a contract.
How can policymakers structure FIAs to ensure that they don not create perverse incentives, such as inadvertently encouraging older youth to avoid adoption?
If older foster youth will lose out on a FIA by being adopted, this could lead to poor decision making on the part of older youth (who often legally have the right to consent to or decline an adoptive family). To avoid this perverse incentive, policy- makers could continue to fund FIAs for older children who are adopted or keep them eligible for milestone awards (such as high school graduation, college enrollment, etc.).
How and when should FIAs be funded?
Options abound for funding FIAs, including by using state- funds or federal assistance (if the reimbursable uses of federal funds were expanded to include direct payments to current and former foster youth). Eligible youth could accrue funds based on a daily rate, similar to the amount foster parents receive for caring for youth. If a foster youth began accruing FIA funds at age 16 at a rate of $20 per day and stayed in care until age 21, then $36,500 (plus any milestone awards) would be deposited in their FIA. The important aspects of any FIA policy require the foster youth be provided with a significant financial asset and that they have learned how to spend wisely.
When should foster youth be able to access their FIA?
If FIA funds start accruing prior to age 18, policymakers might consider how to allow minors to spend those funds with supervision. FIAs could function like a trust. Perhaps a 16-year-old needs a phone. A FIA could allow for that purchase and to pay for monthly service fees, if that child’s caseworker agrees it is a legitimate need, approves the purchase, and helps negotiate the service contract. The goal should be to train these youth before they exit the system and give them as much freedom to make their own decisions as possible once they attain the age of majority.
What financial incentives could be built into a FIA program to encourage positive behaviors and produce better life outcomes for youth aging out of foster care?
Policymakers could establish financial incentives to encourage individuals to achieve certain milestones on the way to independence and to help them avoid negative life outcomes. Milestone bonuses could provide additional cash deposits for graduating from high school or earning a GED. Financial bonuses could also be provided for holding a steady job, enrolling in and attending post-secondary school, maintaining a minimum GPA, passing college courses, or taking an unpaid internship. A small bonus could even be given for successfully completing a state-approved financial literacy course.
Should there be limits on what foster youth can purchase with FIA funds?
A growing body of evidence indicates that direct cash assistance, without strings, is better at improving long-term outcomes for the poor and disadvantaged than traditional welfare programs that provide participants with services or that place strings on the financial assistance. For example, a recent test of different strategies to help homeless families find stable housing and increase self-sufficiency showed that families that received priority access to housing subsidies fared better than families that received wrap-around services and access to temporary housing facilities.
Policymakers should balance the need for financial account- ability and transparency with the purpose of FIAs, which is to provide older foster youth with financial means to transition to independent living and to encourage them to remain visible and engaged with caring adults. Undoubtedly, transition-age foster youth will struggle making wise choices, but remember the state is already cutting them loose from the foster care system with the expectation they will figure out a way to live independently. If we, as a society, think these youth can live independently, we should give them some measure of freedom to manage their own finances. We should also do what we can in advance to instill financial wisdom and discipline.
To the extent policymakers want to limit allowable expenses, legitimate expenses should include housing (including apartment deposits or down payments on a home); vehicles; food; utilities; clothing (or at least uniforms required for work); education or job training; costs associated with starting their own business; and any other expenses policymakers might identify as critical to establishing independence as an adult.
How much oversight should the government maintain over FIAs?
While older foster youths ought to be given wide latitude to make spending decisions for themselves, policymakers could establish requirements for how funds deposited into a FIA can be spent and periodically audit expenditures to ensure that funds are being used appropriately. FIAs could also operate like a trust, with someone, such as the foster youth’s caseworker, monitoring the account. Beneficiaries could also be required to regularly meet or speak with a designated representative overseeing the account. Facilitating commu- nication with a trusted adult could encourage former foster youth to maintain ongoing contact with a representative of the state, and even learn about eligibility for other state benefits or nonprofit or community support options.
Should bad behavior be penalized?
Penalizing bad behavior, such as engaging in criminal activ- ity, by reducing or ending payments into a youth’s FIA could serve as a strong disincentive to engaging in risky behaviors that undermine the goal of independence. Or, instead of losing payments or funds, youth could simply lose their spending freedom by having someone from the state be put in charge of how the dollars are spent. Once funds are deposited in the account, youth should be able to count on these funds being there for them, even if they make mistakes and even if future deposits into the accounts are suspended or revoked.
Conclusion
This proposal is not a panacea or a replacement for a stable family. State policies must balance incentives in a way that encourages the state to work hard to find older youths adoptive homes, or to successfully reunify them with their biological families, while simultaneously recognizing that older children who do not have a permanent family will need financial support to successfully transition to adulthood.
The ongoing challenges that former foster youth face in adulthood suggest that publicly funded Fostering Indepen- dence Accounts could help ensure more successful transitions to independence. Most current policies deliver assistance to transition-age youth by providing non-cash benefits (housing assistance and healthcare), or to a caretaker (such as payments to an institutional care provider). This proposal aims to provide direct financial support and financial incentives to older youth as they age out of foster care to facilitate their successful transition to independent living.
About the authors
Dan Lips is a Visiting Fellow at the Foundation for Research on Equal Opportunity.
Tim Keller is Senior Vice President and Legal Director at Gen Justice.
