New babies eligible for college grant
BISMARCK (AP) -- North Dakota newborns are now eligible for a $100 state grant for their future college educations, a dollop of cash that state officials hope will encourage parents to get an early start on a daunting savings job.
The program announced Wednesday makes North Dakota the third state in the nation, after Maine and Rhode Island, to offer college savings grants to newborns, according to the College Savings Plans Network, a group of state officials that promote the use of tax-deferred college savings accounts.
Other states may take up the idea, said Peter Kerwin, a Rhode Island higher education finance official.
"One of the challenges we face in trying to reach out to parents is to let them know how important it is to get started early," said Kerwin, program development chief for the Rhode Island Higher Education Assistance Authority. "This is a really helpful way to do it."
Eric Hardmeyer, president of the Bank of North Dakota, said the state-owned bank has set aside $1 million for grants during the next year.
North Dakota had 8,974 live births in 2009, the most recent year for which statistics are available, according to the state Health Department's vital records division. Hardmeyer said he hoped as many as 2,700 babies will be enrolled in the program's first year.
The grants are intended to encourage parents to set up so-called 529 savings programs for their children. Savings account earnings grow tax-free, and it is important to get them started right away, Hardmeyer and Gov. Jack Dalrymple said Wednesday at a state Capitol news conference held to publicize the initiative.
Children born in North Dakota on or after Jan. 1, 2011, are eligible for the $100 grants. They must be signed up by their first birthdays, and a grant must be matched by $100 in private funds by the child's fourth birthday to keep the state money.
The Bank of North Dakota will oversee the program and finance the grants from a share of the administrative fees it collects for managing existing North Dakota college savings accounts, Hardmeyer said.
North Dakota's existing 529 college savings program now has 18,175 accounts. Of those, 4,303 are held by North Dakota residents. Couples may deduct from their state income taxes up to $10,000 in contributions, while a single taxpayer may deduct up to $5,000.
North Dakota's college savings program already offers grants of $300 to $900 for children, with the amount based on household income. Couples are not eligible if they have an adjusted gross income of more than $80,000. Single parents with incomes of greater than $40,000 are not eligible.
Hardmeyer said the $100 grant for newborns is open to any North Dakota family, regardless of household earnings.
"There is no income (limit) on this. All you have to do is have a baby," Hardmeyer said. "That's all you have to do."