Reducing Inequality in Outside-of-School Learning

Low-income children have fewer resources to learn when schools are closed. Children’s Savings Accounts can help them.

Photo: Kiana Bosman / Unsplash

Executive Summary

The COVID-19 pandemic has cast a spotlight on one of the significant barriers to equal opportunity in American education. Children from lower socioeconomic backgrounds are more dependent on in-school learning and have fewer resources to learn when schools are closed.

For decades, researchers have studied differences in outside-of-school learning opportunities based on children’s socioeconomic status. A common view is that these differences and the “summer learning slide” contribute to the academic achievement gap between poor and nonpoor children.¹

Many factors likely affect these differences in outside-of-school learning rates between poor and nonpoor children, such family structure, parental education levels, and time spent with adults. One significant difference is that low-income families have fewer resources for outside of school learning. According to Greg J. Duncan and Richard J. Murnane, the richest 20 percent of American families spent approximately $9,400 on enrichment for their children compared to $1,400 spent by the poorest 20 percent, as of 2006.

Wealth inequality (including differences in the ability to save for college) also affect children’s educational opportunities and attainment. In their 2018 book Making Education Work for the Poor, William Elliott and Melinda Lewis examine the challenge of “eradicating the opportunity gap” and reason that it will require “eliminating persistent patterns of wealth inequality.” The authors contend that providing children from lower socioeconomic background with financial resources at an early age (through investments in children’s savings accounts or CSAs) can transform their lives by changing expectations and behaviors that increase educational achievement and attainment. Elliott and Lewis point to encouraging empirical evidence from existing CSA programs in the United States which find that investments in children’s savings accounts provide benefits to the children who receive them, even during their earliest years.

Addressing inequality in students’ outside-of-school learning opportunities and ability to save for education expenses should have been a priority for policymakers before the pandemic. But COVID-19 and the resulting education and economic impacts on inequality has increased the urgency. Pandemic-related school closures are expanding the academic achievement gap between poor and nonpoor children.

This article discusses these challenges and presents recommendation for policymakers to increase lower-income children’s outside of school learning and college savings opportunities, including:

1. Creating new options for government or charitable investments into low-income children’s savings accounts or 529 accounts.
2. Reforming federal and state education and funding programs to allow a portion of funding to be contributed into a children’s savings account that allows enrichment expenses or 529 accounts (if those are expanded to allow tutoring and other outside-of-school expenses). For example, during the pandemic, schools should provide a share of funding directly to low-income parents through an education savings account for tutoring and enrichment expenses if they are unable to educate their children in school. Florida’s $500 Reading Scholarship Account program could be a model for how to use accounts to support tutoring and outside of school learning.
3. Expanding the allowable uses of 529 account funds to include tutoring, summer school, and other academic enrichment programs for account holders living in households with incomes below the national median.

Each of these reforms will promote equal opportunity by narrowing educational and wealth gaps between poor and nonpoor children. During the COVID-19 pandemic, these combined reforms would create a structure for supporting urgent investments to provide remedial instruction and other supports to children from lower socioeconomic backgrounds to promote equal opportunity.

(Authors’ note: This is a working paper that will be continuously updated with new evidence and policy ideas. Revisions will be noted at the end of the paper. Please check back frequently.)

Inequality in outside-of-school learning opportunities and the achievement gap

Last year, I reviewed the state of equal opportunity in American K-12 education. Despite decades of federal laws and programs aimed to address inequality and promote equal opportunity, an academic achievement gap between poor and nonpoor children has persisted for a half century.

The United States has largely narrowed past inequalities in education government funding available to public schools in high-poverty communities. Today, the average per-student revenue in high-poverty schools is only $500 (or 3.5 percent) less than the average amount of revenue at low-poverty schools, according to the U.S. Department of Education. In a majority of the states, high-poverty school districts actually have more per-pupil revenue than low-poverty districts.

Differences in enrichment expenditures and experiences. But one area of inequality that has not been addressed is the educational resources available to children outside of school. According to Greg J. Duncan and Richard J. Murnane, the richest 20 percent of American families spent approximately $9,400 on enrichment for their children compared to $1,400 spent by the poorest 20 percent, as of 2006. This means that children from higher income families are likely to benefit from enrichment experiences including summer camps, music lessons, and travel, which affect background knowledge and academic achievement.²

U.S. Department of Education data show that children from non-poor families are more likely to participate in a variety of outside of school educational experiences (such as visiting state or national parks, museums, plays or concerts, historical sites, and zoos and aquariums). They are also more likely to participate in a variety of extracurricular activities (including sports, music, dance, or art lessons, etc.) [See Table 13 and Table 14 of FREOPP’s 2019 review.] As Alia Wong wrote in The Atlantic in 2015, “access to after-school programs is growing more unequal, and that’s pushing disadvantaged kids further behind,” citing evidence showing widening gaps in participation rates over the past 50 years.

The summer learning slide. In the past, differences in children’s outside-of-school learning opportunities have been most acute during summer vacation, when most public schools close for months. Researchers have often described the effect of summer vacation on students’ academic achievement as the “summer learning slide.” While children generally lose or forget some of what they learned during the prior school year over summer, children from poor families are more likely to fall behind. The RAND Corporation studied the evidence of the summer learning slide and found:

On average, all students lose skills, particularly in mathematics. However, summer learning loss disproportionately affects low-income students, particularly in reading. While their higher-income peers, on average, post gains in reading, low-income students show losses at the end of the summer.

Further, RAND found that the learning losses were cumulative, citing an academic study that showed that “approximately two-thirds of the reading achievement gap by ninth grade could be attributed to summer learning loss in the first five years of schooling.”

School closures during the COVID-19 pandemic are increasing the achievement gap. In the future, education researchers will study and analyze how differences in students’ ability to learn outside of school was affected by the COVID-19 pandemic, and the potentially acute effects on disadvantaged children.

Brown University researchers recently studied existing evidence about how time out of school affects student learning and projected the potential impacts of school closures during the pandemic. They found:

Under these projections, students are likely to return in fall 2020 with approximately 63–68% of the learning gains in reading relative to a typical school year and with 37–50% of the learning gains in math. However, we estimate that losing ground during the COVID-19 school closures would not be universal, with the top third of students potentially making gains in reading.

In other words, the pandemic and related school closures are likely to increase the academic achievement gap between children from rich and poor households. Moreover, policymakers should anticipate this trend to continue if schools are closed or partly closed during the 2020–21 school year.

Background on Children’s Savings Accounts as a solution to promote equal opportunity

Researchers and policymakers have studied strategies for reducing wealth inequality to promote academic achievement and attainment and expand equal opportunity. One option is to establish and sponsor investments in children’s savings accounts.

In their 2018 book Making Education Work for the Poor, William Elliott and Melinda Lewis study children’s savings accounts. They describe CSAs as: “interventions that aim to equip children with assets and cultivate the development of identities consistent with educational attainment.” (p.95) In other words, CSAs involve creating and funding early investments in disadvantaged children’s education savings accounts to allow funds to grow over time and to change children’s and parents’ expectations about their future. Moreover, CSAs provide families with an investment vehicle to save for their children’s future. CSAs can be funded either by the government or by philanthropic contributions. Often the CSA are deposited into a child-owned bank account or a state-managed 529 savings plan for college and K-12 education expenses.

Elliot and Lewis reported that: “At the end of 2016, there were nearly 313,000 children with a CSA in 42 programs operating in 29 states, a 39% increase in enrollment from the previous year.” (p.96) These programs are rapidly growing.

The following are a few examples of Children Savings Account programs sponsored by states, school districts, and charitable organizations:

• Promise Indiana facilitates free enrollment in children’s enrollment in the state’s 529 account program with some counties offering seed or matching investments. The program’s stated purpose is “making sure all youth have opportunities to build assets for their futures, and helping communities develop college-going culture.”
• Nevada’s College Kick Start program offers a $50 investment or college savings scholarship “for all public-school kindergarten students in Nevada,” using “grants, private sponsorships, and program management fees,” invested in a child’s 529 college savings plan. As of December 2019, 244,000 children were enrolled.
• San Francisco’s Kindergarten-to-College Program automatically enrolls kindergarteners in the public-school district in a college savings program managed by the city and provides a $50 seed investment.
• Children born in Maine are eligible to receive a $500 grant into a state 529 plan funded by the Alfond Scholarship Foundation, a charity established by a Maine businessman and philanthropist. More than 100,000 kids have received investments as of 2019. (The program now also offers a $100 matching grant if families invest $25 within their child’s first year.)
• Rhode Island’s College Bound Baby program provides a $100 investment in a 529 savings account for every child born in the Ocean State.

Encouraging empirical evidence suggests that children’s savings account programs have positive effects for children and parents even during their early years. For example, Washington University conducted a randomized control trial in Oklahoma in 2007 — providing $1,000 investments into the 529 accounts of approximately 1,350 children randomly selected. A control group of approximately 1,350 students did not receive investments. The “treatment group” received other benefits including savings matches and educational materials about savings for college.

Washington University researchers studying the program over time report that the treatment group benefited in multiple ways. In terms of financial benefits, “treatment children are 30x more likely than control children to have 529 college savings,” and the total amount of savings is 6x more than the control group. The researchers also found that children receiving the investments demonstrated emotional-social benefits compared to the control group, particularly among economically disadvantaged children. “At about age 4, disadvantaged treatment children score better than disadvantaged control children on a measure of social-emotional development,” the researchers found, adding: “The effects of the CDA in these groups are similar in size to at least one estimate of the effect of the Head Start program on early social-emotional development.” (On average, Head Start spends more than $11,000 per child each year.)

Elliott and Lewis summarized the limited available empirical information about CSA programs and reported positive impacts, including increased parental expectations. “Crucially, it appears that equipping families with assets for their children’s education may interrupt the effects of poverty on development, from the beginning,” they write.

While CSAs have generally been focused on addressing long-term wealth inequality and the ability to save for college, they also have the potential to address inequality in outside-of-school learning opportunities, particularly as federal policymakers consider further expanding the allowable uses of 529 savings accounts, which are a common investment vehicle for children’s savings accounts.

Background on 529 savings accounts and expanding allowable uses

Under federal law, Americans can make investments in a Qualified Tuition Program, often referred to as 529 plans, which is a state-established or maintained savings program. A 529 account allows a person to save tax-free for certain education expenses (including college tuition and expenses or K-12 school tuition) or to pre-pay college tuition costs. According to the Tax Policy Center, every state besides Wyoming sponsors a state 529 plan. States’ management of programs and accounts ensures meaningful oversight that funds are used in a manner consistent with federal law.

The College Savings Plan Network reports that American families owned more than 14 million 529 accounts, which held more than $370 billion in assets as of the end of 2019. The average plan held $26,000 at the time. Many states provide tax benefits for making contributions (including full or partial state income tax credits or deductions), which have contributed to their growing popularity.

Affluent and middle-class families are much more likely to invest in 529 accounts than the poor. According to a 2015 Federal Reserve study, only 0.3 percent of households with incomes below the bottom half of the income percentiles as of 2013. The 2012 U.S. Government Accountability Office report found that families that invested in 529 accounts “had about 25 times the median financial assets of those without.” Many states provide tax benefits for making contributions (including full or partial state income tax credits or deductions).

Recent federal reforms and proposals to expand 529 plan allowable uses. Federal policymakers have been increasing the utility of the funds saved in 529 accounts by expanding their allowable uses. The 2017 federal tax law reformed 529 benefits so that funds saved in 529 accounts can now be used on K-12 schooling expenses including public school enrollment or private school tuition expenses, up to $10,000 per year. According to the Internal Revenue Service, funds saved in 529 accounts can also be used for “expenses for fees, books, supplies, and equipment required for the participation in an apprenticeship program registered and certified with the Secretary of Labor and qualified education loan repayments in limited amounts.”

Policymakers have considered further expanding the allowable uses to include other eligible expenses, including homeschooling and tutoring costs.

In 2017, Congressional lawmakers stripped language from the final version of the tax bill that would have expanded the allowable uses of 529 account funds to include homeschooling costs and other outside of school learning expenses (such as tutoring, education classes outside of the home, online educational materials, dual enrollment at higher education institutions, and educational therapies for children with disabilities).

Lawmakers continue to urge for this expansion in allowable uses. For example, Members of Congress recently sent a letter to Congressional leaders calling for homeschooling and other outside of school expenses to be allowed during the COVID-19 pandemic since many families were now educating their children at home.

Recommendations for policymakers

Promising research evidence suggests that making early investments in children’s savings account programs, such as the SEED Oklahoma program, provides economic and social-emotional benefits for participating children. Investing in low-income children’s savings accounts, or 529 plans, has the opportunity to reduce wealth or income inequality and also has the potential to change poor families’ outlook on their children’s future.

Importantly, increasing government and/or philanthropic investments in low-income children’s 529 plans while also expanding the allowable uses of those plans to include tutoring and other outside-of-school learning expenses would reduce the enrichment gap and potentially narrow achievement gaps.

Federal and state policymakers should:

1. Create options for government or charitable investments into low-income children’s 529 accounts. State and local governments should follow the example of pioneering states that have established children’s savings account programs and establish programs to provide seed funding or matching contributions into low-income children’s 529 accounts during their first year of birth. Moreover, states should also reform existing tax incentives to encourage contributions into low-income children’s 529 accounts. Federal policymakers should reform rules for charitable investments to ensure that investments into low-income children’s 529 accounts are eligible for a tax deduction under rules allowing and encouraging charitable contributions to non-profit and educational organizations.
2. Reform federal and state education and funding programs to allow a portion of funding to be redirected into a children’s saving account that allows tutoring and enrichment expenses or 529 account (if the latter is expanded to allow tutoring expenses). Federal and state policymakers should implement creative reforms to allow a share of federal or state education funding to be deposited into children’s 529 savings account. For example, state and local educational agency school funding formulas could be modified to allow a share of a child’s school funding to instead be deposited into a children’s savings account.. Public schools also could be allowed to award an annual investment (up to a certain amount) into a qualifying, low-income child’s 529 account. According to the National Center of Education Statistics, the average per-pupil expenditures at U.S. public schools was $14,400 during the 2016–17 school year. With this amount of per-child funding, many public schools may be able to invest a share of the child’s school funding into a children’s savings account. During the pandemic, school districts should be required to provide a share of funding their funding into a state-managed ESA that allows for tutoring expenses or a 529 account (if the latter are expanded to allow tutoring and enrichment expenses, per recommendation 3) if the school is unable to provide in-person classes. For example, Florida’s Reading Scholarship Account program provides children in Grades 3 through 5 who are academically behind in reading with $500 in an account that can be spent on instructional materials, tutoring, or summer or afterschool programs focused on reading and literacy skills. The Reading Scholarship Account program could be a model for how states and school districts encourage tutoring and remedial instruction for children affected by pandemic-related school closures.
3. Expand the allowable uses of 529 account funds to include tutoring, summer school, and other academic enrichment programs for account holders living in households with incomes below the national median. Congress should expand the allowable uses of 529 accounts to include outside-of-school learning options, such as tutoring, virtual learning, and summer school programs, for account holders from households with incomes below the national median. As federal and state programs increase investment in low-income children’s accounts, expanding these allowable uses could narrow the academic enrichment and outside-of-school learning gap. During the pandemic, expanding 529 accounts in this manner would provide states, school systems and parents with a state-managed vehicle to provide school funding directly to parents and children to support enrichment or tutoring expenses.

The potential for bipartisan interest in addressing wealth and enrichment gaps in American education

Experience suggests that there may be bipartisan interest in reforms to use child’s savings accounts to narrow college savings inequality and the enrichment gap between poor and nonpoor children. The New America Foundation provided a history of legislative proposals to promote children’s savings accounts in a 2014 paper, finding that a diverse coalition of former senators across the political spectrum have introduced legislation to help low-income children save for the future.

Among contemporary lawmakers, Senator Cory Booker (D-NJ) and Rep. Ayanna Presley reintroduced legislation in 2019, the American Opportunity Accounts Act, which would provide all American children with a $1,000 investment into a savings account at birth. Funds would earn interest until age 18 when they could be used for certain expenses, including education or purchasing a home.

Many conservative lawmakers have supported expanding the allowable uses of 529 accounts and reforms that give economically-disadvantaged children greater control over how education funding is spent.

Combining these approaches to reduce wealth inequality and to promote greater access to outside-of-school learning options for economically-children would advance both liberal and conservative policy approaches to promoting equal opportunity in education.

During the COVID-19 pandemic, these combined reforms would create a framework to provide direct funding assistance to children from lower socioeconomic backgrounds to support tutoring and other educational services to address potential learning losses while children are out of school.

Conclusion and next steps

I will be updating this working paper as we continue to study inequality in outside-of-school learning options. A focus of our research will be how the current COVID-19 pandemic and school related shutdowns are increasing inequality. We will be updating this paper and developing additional policy recommendations based on this research.

Endnotes

¹ The RAND Corporation described the research evidence on the summer learning slide in 2019: “Research evidence suggests that summer contributes to income-based achievement and opportunity gaps. A seminal meta-analysis of summer learning found that all students lost mathematics and reading knowledge over the summer (Cooper, Nye, et al., 1996). This study also indicated that losses were larger for low-income students, particularly in reading. Although recent studies are inconclusive on the absolute loss of achievement over the summer, they provide additional evidence that low-income students experience greater setbacks over the summer relative to their wealthier peers.” Jennifer Sloan McCombs, et all, “Investing in Successful Summer Programs: A Review of Evidence Under the Every Student Succeeds Act,” RAND Corporation, 2019.

² Duncan and Murnane theorize that differences in enrichment activities contributes to differences in achievement: “Differential access to such activities may explain the gaps in background knowledge and vocabulary be-tween children from high-income families and those from low-income families that are so predictive of reading skills in the middle and high school years (Snow 2002).” Greg J. Duncan, Richard J. Murnane, “Rising Inequality in Family Incomes and Children’s Educational Outcomes,” The Russell Sage Foundation Journal of the Social Sciences, Volume 2, Number 2, May 2016.