Texas has the nation’s largest and most efficient child support system. With over 1.2 million cases, about 1 in 5 Texas children receive child support from their noncustodial parent (NCP). Every year, over $4 billion courses through the “plumbing” of the Child Support Division (CSD) of the Texas Office of Attorney General, effectively transferring dollars to the custodial parent (CP) legally responsible for rearing the children. As part of its Building Assets for Fathers and Families Initiative, CSD conducted a survey to develop a baseline understanding of the financial habits of parents in the child support system and financial stability strategies that are most appealing to parents in the system. The survey intentionally oversampled low-income parents in the system because they are most likely to benefit from financial stability services. In March, CSD released the findings from this survey of NCPs and CPs—Child Support and Financial Stability Strategies: Understanding Financial Goals and Habits of Texas Child Support Customers. Below is some demographic information about those surveyed:
- Only 27 percent of surveyed custodial parents had never received any public assistance compared to 32 percent for the total child support caseload.
- Compared to the state average, surveyed custodial parents are more likely to graduate from high school and acquire some postsecondary education, but less likely to have a bachelor’s degree.
- Over two-thirds of surveyed custodial parents have household income less than $30,000.
- Over seventy percent of surveyed noncustodial parents have no education beyond high school.
- Surveyed custodial parents were much more likely than surveyed noncustodial parents to use alternative financial services, such as rapid refund loans, payday loans, rent-to-own, and “buy here, pay here” auto financing.
Despite these sub-optimal demographics for surveyed child support customers, both groups of parents exhibited a strong desire for financial stability and asset building services, especially a joint or shared college savings account. In fact, 94.3% of custodial parents ranked “saving for children’s future educational expenses” as an important goal to the family’s future—above all other goals including “getting a better paying job”, “owning a home” or “saving for retirement”. These custodial parents also expressed strong interest in individual development accounts (IDAs), financial management classes, and a default savings or “auto-save” option built into periodic child support payments. Currently, just over half (51%) of CPs receive child support on the current stored value/debit card, which has no feasible way to earmark a portion of the payment towards a “savings bucket”. With the Child Support debit card contract up for rebid next year, it is an ideal opportunity to leverage new technologies to create new savers and more financial stability for child support customers.
How can we turn these positive mindsets into new economic opportunities for child support customers?
These findings should change the way we think about child support in Texas. To date, it has strictly been an income support program for children and families. RAISE Texas, in partnership with Citi, Texas AG Child Support Division, and three local nonprofits are conducting a demonstration project linking lump sum child support payments with college savings incentives. Child Support for College (CS4C) is in its initial stages and should provide interesting insights into how to capitalize on child support parents’ overwhelming desire to save for their children’s education. These survey findings remind us that child support can be an important delivery system for state asset building and college savings efforts. As the report notes, “employing mechanisms within child support programs to promote college savings can be a means by which state and federal governments actively encourage parents to provide a pathway toward self-sufficiency for their children.” Given the relatively steady stream of income, along with a common parental desire to dedicate a shared college savings account, Texas should explore further how to embed college savings into the child support customer base. If so, Texas would be leading the way.