Program to boost college savings

Aim is 529 plans for Marshallese

Hundreds of Marshallese kids will get a kickstart to their college savings under a local program that launches next month and aims to get more Marshallese into higher education.

The Arkansas treasurer’s office, the Arkansas Coalition of Marshallese, the University of Arkansas and other groups have banded together to provide between $100 and $200 for up to 200 children that will go into savings accounts called 529 plans.

The plans, named for a section in federal tax law, are essentially privately managed investments that can grow over time and reduce the holders’ income taxes by hundreds of dollars a year as they set aside more and more money for the future. They’re open to any family in the state that puts in a minimum starting contribution of $25.

“It’s the adage of how do you eat an elephant: You take a bite at a time,” said Emma Willis, executive director of the Arkansas 529 College Investing Plan, the state treasurer division that administers the plan.

Lucy Capelle, director

at the coalition, said the islander community sees the plans as a dependable way to help propel their children into work as nurses, doctors and other professionals. She’d never heard of the option until the University of Arkansas School of Social Work in Fayetteville approached the group with the idea. Now she plans to sign up all four of her children, and dozens of other families have set up appointments for more than 100 children.

“They are really excited,” Capelle said about members of the community, which the university has gauged at about 12,000 residents in and near Springdale. They also hope the program grows to include more families, she added.

Residents of the Marshall Islands and two other Pacific nations can travel, work and live in the United States without visas under a 1986 treaty giving the U.S. continued military access to the islands’ territory. Marshallese have grouped together mostly in Hawaii, California, and Arkansas, often coming to work at Tyson Foods and similar companies.

More than one-third of the local islanders are in poverty, more than twice the overall rate for Northwest Arkansas, while they have attended at least some college at less than half of the region’s rate, according to census estimates for 2015. The University of Arkansas, Fayetteville, counted 27 Pacific Islander students out of more than 27,000 in fall 2016.

On top of that, dozens of U.S. nuclear tests and other factors in the past several decades have left many islanders with health problems such as cancer, high blood pressure and diabetes, straining resources and heightening the need for islanders in health-related fields.

The 529 plans can be one of many ways to pay for more schooling, whether it’s at a vocational school like Northwest Technical Institute, a community college or a university, Willis said. They don’t have to cover the entire cost of school, but every bit can help.

“Once a kid receives a 529 specifically, they are three times more likely to go off to college,” she said, noting she holds one for her 12-year-old. “It’s really just about starting somewhere and creating a mindset that you can do it.”

Arkansas administers about 40,000 accounts with an average of $14,000, most of them held by state residents, Willis said.

Arkansas’ 529s allow the holders to trim their taxes by working as a tax deduction: Every dollar put in, up to $5,000 a year per taxpayer, can be subtracted from a person’s annual income that would be taxed by the state. That means someone who makes around $40,000 a year and saved $5,000 for a 529, for example, could be taxed only on $35,000 of that income, saving a few hundred dollars.

As the investment grows, those earnings won’t be taxed by the state or the federal government when they’re withdrawn for school-related costs, working like some retirement and health savings accounts. Investments always have a risk for staying stagnant or even losing value, but the state’s 529 plans have all made gains since they started, according the state 529 program. Account holders also pay a small annual fee, a fraction of a percent of the account’s amount.

A review of the research into 529s’ impact on families by the Washington, D.C.based Brookings Institution concluded the plans can disproportionately benefit high-income earners but can also create a “college-going mindset” among low-income students.

The Marshallese program is an interlocking effort by multiple groups.

The Winthrop Rockefeller Foundation in Little Rock kicked in the grant paying $100 into the participants’ accounts. United Way provided enough to double that amount if the participating families take part in financial classes on topics like budgeting or buying a car. The Economic Opportunity Agency, a Springdale nonprofit, is training the Marshallese coalition to teach the classes in Marshallese.

Finally, two professors of social work at the university will keep track of how much families benefit from the program.

“We’re seeing this as the pilot to get started,” said Marcia Shobe, a professor who worked with her colleague, Yvette Murphy-Erbe, and the Marshallese community itself to shape the program. “This is totally Marshallese-driven.”

Other nonprofit groups, or even corporations such as Tyson, could help it expand, Shobe said. Many Marshallese people hope to set up a community trust to help more and more children start saving.

“Lower income people can and do save, and it seems to make a difference in how they view their future,” she added, and 529s bring advantages for the large and geographically spread families common to Marshallese. Any family member can contribute to an account, and the money in it can go to schools inside and outside the United States.

The Marshallese program is the first focused on the community but is one of several encouraging families in the state to create college savings accounts, Willis said. A recent project gave $15,000 for first-graders in northeast Arkansas, for instance.

“Once a kid receives a 529 specifically, they are three times more likely to go off to college. It’s really just about starting somewhere and creating a mindset that you can do it.” — Emma Willis, executive director of the Arkansas 529 College Investing Plan