Could A $1,000 Fund For First Graders Make College A Reality?

Max Yoder of The First Fund wants to find out what happens when you take a first grader from a low-income family, set her up with a college fund, and educate her family about investing in her future.

For many children of middle-class or privileged backgrounds, it’s presumed practically from birth that they'll go to college. But in economically disadvantaged families, college is far from a sure thing: 79% of students from America's richest families graduate from college, while only 11% of the poorest students do.

Max Yoder

Which is why Max Yoder, founder of The First Fund, came up with a creative plan, a sort of "seed funding” for youngsters’ future college educations. Early in 2013, Yoder was in the middle of bringing his corporate education product Lesson.ly to market and found himself with pockets of downtime. He was dating a young woman who taught first grade in West Lafayette, Indiana, and frequently found himself going on Fridays to hang out with the kids. One stood out, a boy named Andrew.

“He had a lot going for him personality-wise, but didn’t have a lot going for him on the socioeconomic side,” says Yoder. Yoder began to mentally press fast-forward on Andrew’s life, and wondered whether a kid with such energy and promise might not have the funds or encouragement to reach his full potential. “That spurred the idea,” the 25-year-old graduate of Indiana University Bloomington recalls. “How do we put college on the table for kids who don’t have college on the table?”

Yoder’s idea is fairly simple. Step one: Find first graders who show aptitude and promise but whose families have some financial hardship (the metric Yoder uses is students receiving reduced-price lunches through the National School Lunch Program). Through private donations, put $1,000 in a 529 savings plan on each kid’s behalf. Then--crucially--kick off a relationship with this kid and his family about savings, investment, and higher education. “We’ll work with parents on a monthly basis,” says Yoder, “teaching things like compound interest. 'Did you know that if you put five dollars a month in, it grows to X, 20 bucks grows to Y, and 30 bucks grows to Z?' Some have never had the luxury to see that happen.” First Fund serves as the benefactor of the account, which will be released to the youngster when he graduates or turns 18.

When he first got the idea, people counseled Yoder that it was extremely difficult to start a not-for-profit and that he’d be buried in mounds of paperwork. He’d do better, they said, to partner with an existing organization. So he called up a few. “It’s not that I got laughed at,” he says, “but more that I just got told that scholarships are not for first graders--they’re for high schoolers, and that’s just how it is.” Feeling that these notions were arbitrary, Yoder soldiered on alone and filed for tax-exempt status for the organization. Pending IRS approval in the next few months, the first scholarships can be awarded in November. So far, five scholarships have been set up; one was funded by Yoder.

With First Fund, Yoder steps into the contentious debate surrounding the ways in which private money can or can’t help solve systemic inequities in the American public education system, a debate that has largely centered on charter schools. Geoffrey Canada’s , for instance, uses private funds to attempt to break generational poverty in the New York neighborhood; though the program has had some success, critics question how broadly replicable the model can be. Yoder concedes that he’s a “one-man operation” for now and that the nascent organization doesn’t have plans to scale aggressively. He’s more interested in testing the model and expresses an interest in partnering with academics to bring more of the rigors of a longitudinal study to the process.

As with many a small, private initiative, it may be what First Fund symbolizes--the images and stories it evokes--that have the potential to create the greatest change. Imagine being a first grader of limited means, perhaps just beginning to realize the ways in which your family is different from the wealthier ones--and then being told that someone sees promise in you, and has set aside more money than you can fathom as an expression of that faith in that promise. And imagine being the parent of that child, and the ways in which that commitment of time and resources might in turn drive you to change how you think about your child’s future.

The idea, Yoder admits, may be a long shot. How do you know if a seven-year-old will be bound for college, anyway? (Viewers of Michael Apted’s Up series of documentaries are witnesses to the many curve balls life can throw just between a child’s seventh and 14th years.) But “First Fund doesn’t fail if a kid graduates and decides college is not the right fit for them,” says Yoder. “It fails if it doesn’t provide the right insight into what possibilities there are for an individual.”

It’s about changing perceptions, more than anything, about discourse more than dollars. “I’m concerned that for a lot of kids, college is not on the table, and it becomes a self-fulfilling prophecy. If people aren’t talking about college as you grow up, it’s a much more difficult path,” says Yoder. “Let’s put college on the table where it wasn’t there before.”

[Image: Flickr user fatguyinalittlecoat | Clay Reinken]

Add New Comment

12 Comments

  • Anthony Reardon

    According to some modern economists, you can expect greater volatility in the investment markets moving forward. That implies it might not be all that sound to plan for college with a 529 plan.

    Best, Anthony

  • Donna Brewington White

    I loved this idea from the first time I heard about it.  
     
    So much of the value of this program is in the perspective that it engenders. Perspective can mean everything.  The investment is a concrete way to reinforce the vision.  Just the idea that someone believed in you, invested in you, can make a difference.  Trust me, I know. 

  • Guest

    Anything that gets more money set aside for college is a good thing. But $1,000 in 12 years is going to amount to...wait for it...$2,650 figuring on an outrageous 8% interest compounded monthly. And if you think you can do better in the stock market -- maybe, maybe not. I lived through the last decades of stock doldrums and crashes and it has been a total crap shoot trying to save enough for college that way. I get the fact that you are trying to get the families to save, but how realistic is that when then might have a lot of difficulty just putting food on the table? In the end, I applaud the intent but I think it's unrealistic. These kids are going to emerge from high school with enough money to pay their rent for a few months. If that.

  • Max Yoder

    Thanks for the comment. As you mentioned, the intention of the initial $1,000 investment is to spur further investment into the 529 savings plans from the families and friends of the students, and, ultimately, the students themselves. That is, the accounts do not freeze after the initial investment is made; on the contrary, our goal is to see them added to on a regular basis—$5, $10, or more at a time. With time, we will see how well this plan works.

  • R Mourdock

    It's not just about the money.  A child is seven times more likely to go to college if he/she has a college saving fund established by the time he's in high school.  Note:  that doesn't mean 100% of college expenses are paid for, simply that there IS a plan.  Sending the message that a child has college potential is itself, motivating. 

    The flip side.. not long ago we organized a 529 savings event for all of Indianapolis Public Schools' fifth grade students.  One teacher who was involved said to me that she didn't know why we were doing this because "these kids are never going to college".  Really... not one fifth grader in all of IPS?   Such teachers should be drummed out and replaced with Max Yoder type of motivators.

    Richard Mourdock
    Treasurer of Indiana
    Chairman of Indiana's CollegeChoice 529 Savings plans

  • Joey Espinosa

    I love this idea! Actually, I've seen some similar ideas, and I have been wanting something like this for where we live. (We live in the 10th most impoverished county in the US.) I have had a 2nd grader tell me, "I'm not going to college because my mom says it's too expensive." Guess what? This kid was regularly disruptive in class. He didn't see a future to work towards.

  • Denise Bickerstaff

    I too think abuse could be a problem. But starting the discussion about college in first grade is a game changer. It will change how they think about the future. Having a plan for going to college, no matter how vague it may seem, affects all of your choices, especially as a teenager. Risky and self-destructive behavior that seems attractive at the time is a lot less interesting when you think you have a future with more options.

  • Osagie Igbeare

    I agree - as the article mentioned, the impact of Yoder's efforts may be seen in how many additional families and demographics shift their perspective than in the success stories that are a direct result of his fund.

    And as someone hailing from lower middle class Long Island - I can absolutely attest to how focusing on college (went to Stanford) affected my decisions in high school. 

    More than anything - it's a tangible way to expand these kid's universes. In the sense that, when you're poor it's easy to assume that all the opportunities that exist are only the ones you can see. Thus, when you grow up not having seen anyone make it out or do anything different it affects your own ideas of being a success yourself (or lack thereof) and this impacts the myriad of decisions you have to make (about school, recreational pursuit, etc.).

  • Noel Hollis

    Why does it pay to the child at all? Why don't you just get the same number of funds that you have kids, and pay directly to the institutions. That way, if the child flunks out, or decides not to go to college the fund isn't used for what it was not intended to be used for. 

    It would be one thing if the initial deposit wasn't donated money, but you could get into a lot of trouble if somone finds out their donation for a kid to go to school was used for drugs (heck, there are some people that would get pissed if it was used for food) or something because it was disbursed directly to the student or their parents. There's just a lot of room for abuse here, and that's something a non-profit really needs to watch out for.

  • Max Yoder

    Hi  and ,

    Thank you for your feedback. If anything else comes to mind, feel free to email me at max(at)thefirstfund.org or comment here.

    Our initial approach works like this: We release the 529 savings plan to the student when they turn eighteen or graduate from high school, whichever comes first.

    From there, the student is able choose what to do with the money they have accrued over the years (e.g., technical school, bachelor’s degree, entrepreneurship).

    If the student decides not to use the money for education, our current structure allows that to be their choice. They will, however, get hit with retroactive taxes, because the tax-free incentives of a 529 savings plan only apply if the money is used for qualified education expenses, the specifics of which may vary from state to state.

    So, if the money isn't spent on education, arrearage fees are likely to be incurred. It is the job and mission of The First Fund to provide continuing education that helps the students and their parents or guardians to understand the best places to invest their money.
     
    Mitigating abuse is, by nature, a priority, and we could spend all day considering the potential positives, pitfalls, and edge-cases of our current approach. But, in order for outcomes to exist, we need inputs, and, until we start awarding scholarships, we don’t have those yet.

    Like any business or nonprofit, we have to make hypotheses based on limited information and iterate on them when and if the real world shows us that we need to. I like your idea, Noel, and we may learn with time and experience that it is the best approach. I appreciate you taking the time to help us hone what we are working on here. Stay in touch, and thanks again!

    —Max