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HARRISBURG – Starting Jan. 1, the state plans to provide $100 in seed money as an incentive for parents or other adults to set up savings accounts that children can use for post-secondary education costs.
The state budget included a statewide expansion of the Keystone Scholars program, which launched as a pilot program in six counties in February.
Pennsylvania becomes the largest state in the country to roll out this type of savings account incentive plan, said Treasurer Joe Torsella. Similar programs are in place in Rhode Island, Connecticut and Nevada. Massachusetts has a pilot program in place in a part of that state.
Torsella launched the Keystone Scholars demonstration project – a privately funded pilot program open to families welcoming a child in 2018 or 2019, who are residents in one of six pre-selected counties.
Since then, almost 400 savings accounts have been established for children in those pilot program counties, Torsella’s spokeswoman Heidi Havens said in an email. Those include: 120 accounts in Westmoreland County; 111 in Delaware County; 94 in Luzerne County; 31 in Indiana County; 25 in Mifflin County and 12 in Elk County.
The money can be used for college costs or any other post-secondary training, said state Sen. John Gordner, R-Columbia.
“No matter where they live in Pennsylvania or where their talents take them, Keystone Scholars will be there,” Torsella said in a statement.
There are about 140,000 children born in Pennsylvania each year. So if relatives of every child in the state participated in the new program, it would carry a price tag of $14 million a year, according to budget estimates.
The money will come from the investments made by the Treasury Department using savings in Act 529 accounts. The Treasury Department is required to get 10 percent in interest earning every year. Earnings above that 10 percent will be used to offset the cost of the Keystone Scholars program.
Gordner was one of the lawmakers championed the idea. Torsella is a native of Berwick, where Gordner also resides, so the senator attended the treasurer’s swearing-in ceremony.
The senator said he was interested in the concept and after researching it, decided it was worth backing.
“The bad news is, Pennsylvania students graduate with the highest college debt of any state,” Gordner said.
The good news is that this program provides parents with an opportunity to help their students be more financially prepared for college costs, he said.
Torsella said that if parents or another adult puts $25 a month into a child’s savings account beginning at birth, the child will have $10,000 when he or she graduates from college.
While adults can schedule monthly contributions into the accounts, they are required to make monthly payments to qualify for the $100 incentive, Gordner said.