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S. 687 (114th): American Dream Accounts Act

The text of the bill below is as of Mar 10, 2015 (Introduced).


II

114th CONGRESS

1st Session

S. 687

IN THE SENATE OF THE UNITED STATES

March 10, 2015

(for himself and Mr. Rubio) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

A BILL

To authorize the establishment of American Dream Accounts.

1.

Short title

This Act may be cited as the American Dream Accounts Act.

2.

Findings

Congress finds the following:

(1)

Only 9.8 out of every 100 individuals from low-income families will graduate from an institution of higher education before reaching the age of 24.

(2)

Lack of knowledge about how to apply to, and pay for, an institution of higher education is a barrier for many low-income students and students who would be in the first generation in their families to attend an institution of higher education.

(3)

According to Public Agenda, most young adults give secondary school counselors fair or poor ratings for advice about attending an institution of higher education, including advice about how to decide what institution of higher education to attend, how to pay for higher education, what careers to pursue, and how to apply to an institution of higher education.

(4)

More than 1,700,000 students fail to file the Free Application for Federal Student Aid (FAFSA), and about one-third of such students would qualify for a Federal Pell Grant.

(5)

During the last 2 decades, costs of attending institutions of higher education have increased dramatically, but need-based financial aid has not kept pace with such increasing costs.

(6)

In the 1990–1991 school year, the maximum Federal Pell Grant covered 45 percent of the average cost of attendance at a public 4-year institution of higher education (including tuition, fees, room, and board), but in the 2010–2011 school year, the maximum Federal Pell Grant covered only 34 percent of such cost.

(7)

Parental and youth college savings are strong predictors of a youth’s expectations about attendance at an institution of higher education.

(8)

Only 32 percent of parents who earn less than $35,000 a year are saving for their child’s education at an institution of higher education.

(9)

According to the Center for Social Development, wilt occurs when a young person who expects to graduate from a 4-year institution of higher education has not yet attended such institution by the ages of 19 to 22.

(10)

Children who have savings dedicated for attendance at an institution of higher education are 4 times more likely to attend a 4-year institution of higher education and avoid wilt.

3.

Definitions

In this Act:

(1)

American dream account

The term American Dream Account means a personal online account for low-income students that monitors higher education readiness and includes a college savings account.

(2)

Appropriate committees of congress

The term appropriate committees of Congress means the Committee on Health, Education, Labor, and Pensions, the Committee on Appropriations, and the Committee on Finance of the Senate, and the Committee on Education and the Workforce, the Committee on Appropriations, and the Committee on Ways and Means of the House of Representatives, as well as any other Committee of the Senate or House of Representatives that the Secretary determines appropriate.

(3)

Charter school

The term charter school has the meaning given such term in section 5210 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7221i).

(4)

College savings account

The term college savings account means a trust created or organized exclusively for the purpose of paying the qualified expenses of only an individual who, when the trust is created or organized, has not obtained 18 years of age, if the written governing instrument creating the trust contains the following requirements:

(A)

The trustee is a Federally insured financial institution, or a State insured financial institution if a Federally insured financial institution is not available.

(B)

The assets of the trust will be invested in accordance with the direction of the individual or of a parent or guardian of the individual, after consultation with the entity providing the initial contribution to the trust or, if applicable, a matching or other contribution for the individual.

(C)

The assets of the trust will not be commingled with other property except in a common trust fund or common investment fund.

(D)

Any amount in the trust that is attributable to an account seed or matched deposit may be paid or distributed from the trust only for the purpose of paying qualified expenses of the individual.

(5)

Dual or concurrent enrollment program

The term dual or concurrent enrollment program means a program of study—

(A)

provided by an institution of higher education through which a student who has not graduated from high school with a regular high school diploma (as defined in section 200.19(b)(1)(iv) of title 34, Code of Federal Regulations, as such section was in effect on November 28, 2008) is able to earn postsecondary credit; and

(B)

that shall consist of not less than 2 postsecondary credit-bearing courses and support and academic services that help a student persist and complete such courses.

(6)

Early college high school program

The term early college high school program means a formal partnership between at least 1 local educational agency and at least 1 institution of higher education that allows participants, who are primarily low-income students, to simultaneously complete requirements toward earning a regular high school diploma (as defined in section 200.19(b)(1)(iv) of title 34, Code of Federal Regulations, as such section was in effect on November 28, 2008) and earn not less than 12 transferable credits as part of an organized course of study toward a postsecondary degree or credential.

(7)

Eligible entity

The term eligible entity means—

(A)

a State educational agency;

(B)

a local educational agency, including a charter school that operates as its own local educational agency;

(C)

a charter management organization or charter school authorizer;

(D)

an institution of higher education or a Tribal College or University;

(E)

a nonprofit organization;

(F)

an entity with demonstrated experience in educational savings or in assisting low-income students to prepare for, and attend, an institution of higher education;

(G)

a consortium of 2 or more of the entities described in subparagraphs (A) through (F); or

(H)

a consortium of 1 or more of the entities described in subparagraphs (A) through (F) and a public school, a charter school, a school operated by the Bureau of Indian Affairs, or a tribally controlled school.

(8)

Institution of higher education

The term institution of higher education has the meaning given such term in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)).

(9)

Local educational agency

The term local educational agency has the meaning given such term in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801).

(10)

Low-income student

The term low-income student means a student who is eligible to receive a free or reduced price lunch under the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.).

(11)

Parent

The term parent has the meaning given such term in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801).

(12)

Qualified expenses

The term qualified expenses means, with respect to an individual, expenses that—

(A)

are incurred after the individual receives a secondary school diploma or its recognized equivalent; and

(B)

are associated with attending an institution of higher education, including—

(i)

tuition and fees;

(ii)

room and board;

(iii)

textbooks;

(iv)

supplies and equipment; and

(v)

Internet access.

(13)

Secretary

The term Secretary means the Secretary of Education.

(14)

State educational agency

The term State educational agency has the meaning given such term in section 9101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 7801).

(15)

Tribal College or University

The term Tribal College or University has the meaning given such term in section 316(b) of the Higher Education Act of 1965 (20 U.S.C. 1059c(b)).

(16)

Tribally controlled school

The term tribally controlled school has the meaning given such term in section 5212 of the Tribally Controlled Schools Act of 1988 (25 U.S.C. 2511).

4.

Grant program

(a)

Program Authorized

The Secretary is authorized to award grants, on a competitive basis, to eligible entities to enable such eligible entities to establish and administer American Dream Accounts for a group of low-income students.

(b)

Reservation

From the amounts appropriated each fiscal year to carry out this Act, the Secretary shall reserve not more than 5 percent of such amount to carry out the evaluation activities described in section 7.

(c)

Duration

A grant awarded under this Act shall be for a period of not more than 3 years. The Secretary may extend such grant for an additional 2-year period if the Secretary determines that the eligible entity has demonstrated significant progress, based on the factors described in section 5(b)(11).

5.

Applications; priority

(a)

In General

Each eligible entity desiring a grant under this Act shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.

(b)

Contents

At a minimum, the application described in subsection (a) shall include the following:

(1)

A description of the characteristics of a group of not less than 30 low-income public school students who—

(A)

are, at the time of the application, attending a grade not higher than grade 9; and

(B)

will, under the grant, receive an American Dream Account.

(2)

A description of how the eligible entity will engage, and provide support (such as tutoring and mentoring for students, and training for teachers and other stakeholders) either online or in person, to—

(A)

the students in the group described in paragraph (1);

(B)

the family members and teachers of such students; and

(C)

other stakeholders such as school administrators and school counselors.

(3)

An identification of partners who will assist the eligible entity in establishing and sustaining American Dream Accounts.

(4)

A description of what experience the eligible entity or the partners of the eligible entity have in managing college savings accounts, preparing low-income students for postsecondary education, managing online systems, and teaching financial literacy.

(5)

A demonstration that the eligible entity has sufficient resources to provide an initial deposit into the college savings account portion of each American Dream Account.

(6)

A description of how the eligible entity will help increase the value of the college savings account portion of each American Dream Account, such as by providing matching funds or incentives for academic achievement.

(7)

A description of how the eligible entity will notify each participating student in the group described in paragraph (1), on a semiannual basis, of the current balance and status of the college savings account portion of the American Dream Account of the student.

(8)

A plan that describes how the eligible entity will monitor participating students in the group described in paragraph (1) to ensure that the American Dream Account of each student will be maintained if a student in such group changes schools before graduating from secondary school.

(9)

A plan that describes how the American Dream Accounts will be managed for not less than 1 year after a majority of the students in the group described in paragraph (1) graduate from secondary school.

(10)

A description of how the eligible entity will encourage students in the group described in paragraph (1) who fail to graduate from secondary school to continue their education.

(11)

A description of how the eligible entity will evaluate the grant program, including by collecting, as applicable, the following data about the students in the group described in paragraph (1) during the grant period, or until the time of graduation from a secondary school, whichever comes first, and, if sufficient grant funds are available, after the grant period:

(A)

Attendance rates.

(B)

Progress reports.

(C)

Grades and course selections.

(D)

The student graduation rate, as defined in section 1111(b)(2)(C)(vi) of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6311(b)(2)(C)(vi)).

(E)

Rates of student completion of the Free Application for Federal Student Aid described in section 483 of the Higher Education Act of 1965 (20 U.S.C. 1090).

(F)

Rates of enrollment in an institution of higher education.

(G)

Rates of completion at an institution of higher education.

(12)

A description of what will happen to the funds in the college savings account portion of the American Dream Accounts that are dedicated to participating students described in paragraph (1) who have not matriculated at an institution of higher education at the time of the conclusion of the period of American Dream Account management described in paragraph (9), including how the eligible entity will give students this information.

(13)

A description of how the eligible entity will ensure that participating students described in paragraph (1) will have access to the Internet.

(14)

A description of how the eligible entity will take into consideration how funds in the college savings account portion of American Dream Accounts will affect participating families' eligibility for public assistance.

(c)

Priority

In awarding grants under this Act, the Secretary shall give priority to applications from eligible entities that—

(1)

are described in subparagraph (G) or (H) of section 3(7);

(2)

serve the largest number of low-income students;

(3)

in the case of an eligible entity described in subparagraph (A) or (B) of section 3(7), provide opportunities for participating students described in subsection (b)(1) to participate in a dual or concurrent enrollment program or early college high school program at no cost to the student or the student's family; or

(4)

as of the time of application, have been awarded a grant under chapter 2 of subpart 2 of part A of title IV of the Higher Education Act of 1965 (20 U.S.C. 1070a–21 et seq.) (commonly referred to as the GEAR UP program).

6.

Authorized activities

(a)

In General

An eligible entity that receives a grant under this Act shall use such grant funds to establish an American Dream Account for each participating student described in section 5(b)(1), that will be used to—

(1)

open a college savings account for such student;

(2)

monitor the progress of such student online, which—

(A)

shall include monitoring student data relating to—

(i)

grades and course selections;

(ii)

progress reports; and

(iii)

attendance and disciplinary records; and

(B)

may also include monitoring student data relating to a broad range of information, provided by teachers and family members, related to postsecondary education readiness, access, and completion;

(3)

provide opportunities for such students, either online or in person, to learn about financial literacy, including by—

(A)

assisting such students in financial planning for enrollment in an institution of higher education;

(B)

assisting such students in identifying and applying for financial aid (such as loans, grants, and scholarships) for an institution of higher education; and

(C)

enhancing student understanding of consumer, economic, and personal finance concepts;

(4)

provide opportunities for such students, either online or in person, to learn about preparing for enrollment in an institution of higher education, including by providing instruction to students about—

(A)

choosing the appropriate courses to prepare for postsecondary education;

(B)

applying to an institution of higher education;

(C)

building a student portfolio, which may be used when applying to an institution of higher education;

(D)

selecting an institution of higher education;

(E)

choosing a major for the student's postsecondary program of education or a career path; and

(F)

adapting to life at an institution of higher education; and

(5)

provide opportunities for such students, either online or in person, to identify skills or interests, including career interests.

(b)

Access to American Dream Account

(1)

In general

Subject to paragraphs (3) and (4), and in accordance with applicable Federal laws and regulations relating to privacy of information and the privacy of children, an eligible entity that receives a grant under this Act shall allow vested stakeholders, as described in paragraph (2), to have secure access, through an Internet website, to an American Dream Account.

(2)

Vested stakeholders

The vested stakeholders that an eligible entity shall permit to access an American Dream Account are individuals (such as the student's teachers, school counselors, school administrators, or other individuals) that are designated, in accordance with section 444 of the General Education Provisions Act (20 U.S.C. 1232g, commonly known as the Family Educational Rights and Privacy Act of 1974), by the parent of a participating student in whose name such American Dream Account is held, as having permission to access the account. A student's parent may withdraw such designation from an individual at any time.

(3)

Exception for college savings account

An eligible entity that receives a grant under this Act shall not be required to give vested stakeholders, as described in paragraph (2), access to the college savings account portion of a student's American Dream Account.

(4)

Adult students

Notwithstanding paragraphs (1), (2), and (3), if a participating student is age 18 or older, an eligible entity that receives a grant under this Act shall not provide access to such participating student's American Dream Account without the student's consent, in accordance with section 444 of the General Education Provisions Act (20 U.S.C. 1232g, commonly known as the Family Educational Rights and Privacy Act of 1974).

(5)

Input of student information

Student data collected pursuant to subsection (a)(2)(A) shall be entered into an American Dream Account only by a school administrator or the designee of such administrator.

(c)

Prohibition on use of student information

An eligible entity that receives a grant under this Act shall not use any student-level information or data for the purpose of soliciting, advertising, or marketing any financial or non-financial consumer product or service that is offered by such eligible entity, or on behalf of any other person.

(d)

Prohibition on the use of grant funds

An eligible entity shall not use grant funds provided under this Act to provide the initial deposit into a college savings account portion of a student's American Dream Account.

7.

Reports and evaluations

(a)

In general

Not later than 1 year after the Secretary has disbursed grants under this Act, and annually thereafter until each grant disbursed under this Act has ended, the Secretary shall prepare and submit a report to the appropriate committees of Congress, which shall include an evaluation of the effectiveness of the grant program established under this Act.

(b)

Contents

The report described in subsection (a) shall—

(1)

list the grants that have been awarded under section 4(a);

(2)

include the number of students who have an American Dream Account established through a grant awarded under section 4(a);

(3)

provide data (including the interest accrued on college savings accounts that are part of an American Dream Account) in the aggregate, regarding students who have an American Dream Account established through a grant awarded under section 4(a), as compared to similarly situated students who do not have an American Dream Account;

(4)

identify best practices developed by the eligible entities receiving grants under this Act;

(5)

identify any issues related to student privacy and stakeholder accessibility to American Dream Accounts;

(6)

provide feedback from participating students and the parents of such students about the grant program, including—

(A)

the impact of the program;

(B)

aspects of the program that are successful;

(C)

aspects of the program that are not successful; and

(D)

any other data required by the Secretary; and

(7)

provide recommendations for expanding the American Dream Accounts program.

8.

Eligibility to receive Federal student financial aid

Notwithstanding any other provision of law, any funds that are in the college savings account portion of a student's American Dream Account shall not affect such student's eligibility to receive Federal student financial aid, including any Federal student financial aid under the Higher Education Act of 1965 (20 U.S.C. 1001 et seq.), and shall not be considered in determining the amount of any such Federal student aid.

9.

Authorization of appropriations

There are authorized to be appropriated to carry out this Act such sums as may be necessary for fiscal year 2016 and each of the 4 succeeding fiscal years.