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Student loan debt has become perhaps the biggest preoccupation of policy makers overseeing the higher education system.

But often buried beneath headlines about graduates with six-figure debt is the reality that students who most need loans to attend college come from families with little or no savings. That’s especially true of African American households, who rely on loans to send children to college to a greater extent and spend more of their income after loans and grant aid on higher ed than white families.

A proposal from Senator Cory Booker, a New Jersey Democrat, aims to address those patterns of inequality in the U.S. by establishing a savings account for every child in the country when they are born. The federal government would make payments of as much as $2,000 into the account each year based on family income until the child turns 18 -- at which point, he or she could use the money to buy a home or pay for a college education.

It’s the latest ambitious policy idea offered by a handful of expected 2020 Democratic presidential contenders. Senator Bernie Sanders, a Vermont Independent, has introduced legislation for tuition-free public college and Medicare for all. California senator Kamala Harris earlier this month introduced a $2 trillion tax-credit proposal that would boost middle-class incomes by as much as $3,000 per year for individuals and $6,000 for married couples. And Booker has previously introduced legislation for a federal job guarantee.

The Booker "baby bonds" bill and the Harris tax-credit bill both could provide more money for students and families to pay for costs like a college education, although they take very different approaches.

The Booker legislation, dubbed the American Opportunity Accounts Act, follows 20 years of legislative proposals at the federal level to address inequality by creating account-based interventions for children. It would have a larger scale, however, and do more than previous plans to target poor children.

“It’s progressive in a way that that nothing that has come before it really is,” said Justin King, policy director at New America’s Family-Centered Social Policy program.

The latest Booker bill promises as much as $46,215 for each child from a family of four at or below the federal poverty line. That’s well above the roughly $30,000 debt that the average student loan borrower left college with in 2017, according to the Institute for College Access and Success.

Booker said that nearly one in three American families have either zero or negative net wealth.

“This proposal is about helping families break through barriers that keep so many Americans from wealth-creating opportunities like higher education and home ownership,” he said in a statement announcing the bill. “Combined with other tax policy changes, like an expansion of the earned income tax credit, this bill will help level the playing field in our country to ensure that every child has a chance to live their version of the American dream.”

Since the early 2000s, lawmakers in Washington have discussed something like the baby bonds legislation -- often bringing together strange bedfellows.

Former senator Bob Kerrey, a Nebraska Democrat, introduced the “Kids Save” Act in 1999. And in 2005, a bipartisan group of senators introduced the ASPIRE Act, which would establish a $500 investment account for every newborn. The bill was co-authored by New York Democrat Chuck Schumer, Pennsylvania Republican Rick Santorum, South Carolina Republican Jim DeMint and New Jersey Democrat Jon Corzine. The legislation got backing in the House from former Republican Speaker Newt Gingrich and progressive champion Keith Ellison.

And Hillary Clinton as a 2008 Democratic presidential candidate proposed her own child savings account plan.

“In a lot of ways, this bill looks like bills that came before in terms of how the design accounts for all kids,” King said.

What separates the Booker proposal from previous legislation, he said, is that it would involve bonds, not savings accounts. And the government, rather than parents, would make contributions to the accounts. It also has a much bigger scale than previous proposals, King said.

The Booker bill closely resembles a baby bonds proposal from economists Darrick Hamilton, a professor of economics and urban policy at the New School, and William Darity, a professor of economics and public policy at Duke University.

“The key ingredient of how successful you will be in America is how wealthy your family is,” Hamilton told The Washington Post in January.

Much like free college, which has gathered momentum in cities and states across the country, the savings account idea is already being tried at the local level in states like Maine, Nevada and Pennsylvania. And Oklahoma launched the SEED for Oklahoma Kids experiment in 2007 to test the results from child development accounts. 

Michael Sherraden, a distinguished professor and the founding director of the Center for Social Development at Washington University in St. Louis, helped design the program and said it has already shown some positive returns for the families of students. Researchers at the Center for Social Development are evaluating the program as part of a long-term social experiment. They’ve found that mothers of students in the program have a more positive outlook and higher expectations for their child’s educational attainment.

“Their parents expect them to go to college,” he said. “We know from other studies that expectations for educational attainment are very highly associated with actual educational attainment.”

Harris Seeks Income Boost

The Harris tax credit bill, called the LIFT the Middle Class Act, could also have implications for higher ed access -- although the legislation wouldn’t have the same focus on assisting students from the poorest families. The proposal would function like a beefed-up version of the earned income tax credit and phase in quickly for individuals and married couples who work.

It would offer substantial immediate benefits. Families earning up to $60,000 could receive up to $6,000 annually under the proposal. The Institute on Taxation and Economic Policy estimated that one million Pell-eligible students would qualify for a $3,000 tax credit under the plan.

A majority of students of color enrolled in community college have several thousand dollars in unmet need from costs associated with attending classes, said Angela Hanks, director of the Center for Postsecondary and Economic Success at the Center for Law and Social Policy.

“It’s not just tuition and fees, books, and all of those things. You also have to have a place to live,” she said. “Would it go directly to postsecondary ed? It’s up to the individual. But could it help defray some of the costs? For sure.”

Poor people who don’t work, however, wouldn’t get much of a boost from the proposal. Neither would student parents who don’t report earnings or independent students. Individuals must earn at least $3,000 in order to qualify, although the full benefits phase in quickly afterward.

But the bill has the support of some progressive outfits like Demos because of its antipoverty potential overall, said Mark Huelsman, a senior policy analyst at Demos. The windfall from the tax credit could help address both stagnant wages and inequality, he said.

“You're seeing policy proposals now that match the scale of the problem,” Huelsman said. “If you believe that inequality is a generationally defining crisis, it's going to take a large investment to address that. If you believe the racial wealth gap is a crisis-level problem, it’s going to take some serious investments to address that.”

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