Earn to Learn Act aims to make college more accessible

Kate Hoffman, CEO of Earn to Learn, joins Yahoo Finance Live to discuss the introduction of bipartisan Earn to Learn Act legislation introduced by Senators Kyrsten Sinema and Mitt Romney.

Video transcript

- Welcome back. Time now for our Funding Our Future segment. We're going to be chatting now about saving for higher education. There's a new piece of legislation called the Earn to Learn Act that's been introduced that would help students do just that. We're joined now by Kate Hoffman, CEO of Earn to Learn. That was the nonprofit that inspired that bill. So Kate, what is Earn to Learn? How does it work?

KATE HOFFMAN: Earn to Learn is a matched savings program that is serving low to moderate income students and families who qualify for a Pell Grant aid. It requires that students participate in personal finance training, and systematically save per academic year towards a savings goal of $500. There's a college readiness training component, a workforce readiness training component. As long as the students are successfully on track working towards that savings goal, they receive $8.00 for every dollar they save in that account.

And the combination of those savings dollars plus the $4,000 goes towards addressing unmet need for the students.

ALEXIS CHRISTOFOROUS: Now, Kate, I know there are some efforts in the Senate right now. There is a bill to try and take this program national. Talk to us about what that might mean for the program if Congress does indeed pick this up and green light it to become a national program.

KATE HOFFMAN: So the way that we have talked about the opportunity with the Earn to Learn Act moving forward at the federal level is this could be a really wonderful additional tool to support college affordability, access, recruitment, retention, ultimately supporting students through to graduation, with the idea that because they're participating in this match savings program, optimally they are borrowing less money. And they're not taking on nearly as much student loan debt as they might otherwise had taken on had they not participated in this program.

So I really think The Earn to Learn Act sets the stage for us to take this to a level of scale across the country where we can really see the power of matched savings as a way to support college affordability. And certainly, I'm excited that you have up on the screen some of the success metrics that the program has experienced thus far in Arizona where the program launched back in January of 2013. But to that end, the success metrics are really powerful with this concept of matched savings. And certainly we're excited to see this program expand to other states.

ALEXIS CHRISTOFOROUS: I hear what you're saying when you say, if Congress were to pick this up and have it go federal, you would have the ability to scale much more quickly. But how else might the program change if it were to get picked up nationally?

KATE HOFFMAN: So the funding that provided the seed money to help get this up and off the ground actually came from an existing federal program that was housed out of HHS. And ultimately, that program was supporting grantees all over the country in terms of matched savings and building assets for families. So there's already been some work at the federal level to support matched savings. And so our goal with the Earn to Learn Act is that we could really focus match savings on post-secondary access and success and really helping students to minimize borrowing.

And the model itself has a success coaching component that includes, as I mentioned earlier, the college readiness training component, the ongoing financial capability training component, and then also a workforce readiness training component. So we included that success coaching model in that legislation that was just introduced in the Senate. And we're really excited that Senator Sinema and Senator Mitt Romney are championing this approach to financing higher education.

But we also anticipate in the coming weeks, there will be a companion bill introduced in the House as well, a bipartisan companion bill introduced in the House. So we're really excited about that too.

- Now Kate, of course, the student loan debt crisis is frankly, out of control. And efforts and policy proposals, essentially to wipe away that student loan debt, have an incredibly high price tag. And a lot of people have talked about how we would pay for something like that. Curious to know how this type of program is being paid for this match program for students.

KATE HOFFMAN: So the way that we drafted the legislation is that these states would be required to provide a local match that would then be matched dollar for dollar by the future program at the federal level. And with that said, the majority of the states that we're talking to have state funded needs based aid. And the conversations have been around the possibility of carving out a portion of state funded needs based aid to then be able to leverage the dollars at the federal level.

One of the things that I would just want to say to build off of what you said a moment ago about the student loan debt issue is, in my mind, a program like Earn to Learn is really intended to prevent student loan debt in the first place. And the idea being that we're trying to minimize borrowing for students that are entering post-secondary and currently in post-secondary so that as they're getting ready to graduate, they have far less student loan debt than they would have had they not participated in a program like this potentially.

So I just want to stress to you. I really am excited that this model of financing higher ed could have that as an outcome in terms of preventing taking on that student loan debt in the first place, or certainly minimizing it.

ALEXIS CHRISTOFOROUS: Kate, what are some of the conversations you're having with students on what to do with the $500 they need to save as part of the program? And what strings are attached to that, if any?

KATE HOFFMAN: So there is not a merit overlay with the program. It's strictly based on need. So as long as they qualify for at least $1.00 of Pell Grant aid, they're able to participate. The way the program's designed in Arizona is that they have to qualify for in-state tuition and federal financial aid. And they have to be planning to attend one of our partner institutions of higher education, which basically means they have to be able to be admitted to those schools based on the admissions criterion the schools have in place.

We're currently working in partnership with the three state universities in Arizona, the University of Arizona, Arizona State University, and Northern Arizona University. And we recently also expanded to the community colleges in Arizona, Pima Community College, and Maricopa Community College District, which means we're able to support students, whether they're on the four year pathway, the two year pathway, and I'm really excited to share with you all that we just recently expanded the program to support vocational training and CTE as a pathway.

And so that's wonderful in terms of supporting multiple student pathways into the workforce with this model of financing higher education. I would also say the program isn't just about access. It's a renewable scholarship opportunity for the students that are in the program. So every year that they successfully save that $500 and receive that 8 to 1 match, if they're planning to continue for a second year, or a third year, they can renew this scholarship. And it would require for them to save the $500 in that upcoming academic year, so each year that they participate they have to save the $500 to earn the 8 to 1.

- I definitely wish I had that program when I was going to college instead of taking on all of those student loans. Kate Hoffman, CEO of Earn to Learn, thanks so much for joining us for this Funding Our Future segment. Now remember, Funding Our Future is an alliance of organizations dedicated to making a secure retirement possible for all Americans.