Washington, D.C. – A month after President Obama reversed his proposal to effectively eliminate 529 college savings plans, Alaskan Congressman Don Young and the House of Representatives passed legislation to expand, modernize, and strengthen the program that roughly 12 million American families currently utilize to prepare and save for their children’s future.
H.R. 529, which passed the House today 401 to 20, would provide a much needed update for 21st Century college students by permanently making computer equipment and technology a covered higher education expense. The legislation would also work to improve 529 college savings plans by allowing students to redeposit tuition reimbursements into their accounts without financial penalty, in addition to eliminating unnecessary and burdensome paperwork.
“This Administration often talks about the extreme burdens and hardship of paying for post-secondary education, but fails to see the virtue in savings accounts that allow families to plan for their children’s future,” said Congressman Young. “With the average student loan debt surging to nearly $30,000, it’s no surprise that more than 12 million American families have already made the decision to invest their hard earned paychecks towards 529 savings plans. Today’s action by the House starkly contrasts the President’s proposal to eliminate the 529 savings plans, which was scrapped after receiving insurmountable blowback from Democrats, Republicans, and countless middle class families and parents.”
“For the sake of promoting his own foolish agenda, the President has misled the American people in claiming 529 plans are strictly for the wealthy,” Congressman Young said. “The reality, which many Alaskan families have relayed to me and was confirmed by the Joint Committee on Taxation, is that a majority of these accounts – 52% – are owned by families making less than $100,000. We shouldn’t punish hardworking families who make sacrifices for their children; we should give families the opportunity to build a foundation for success and provide their children the means necessary to learn a skill, trade, or a degree through higher education.”
The IRS code allows States to create and administer 529 college savings plans, which may be established on behalf of an individual. Contributions, which are not tax deductible, may be made in amounts as little as $10 by any person. Earnings on 529 plans are not taxable, and distributions from 529 plans for qualified higher education expenses are not taxable. However, distributions used for non-qualified expenses from 529 plan investment earnings are taxable and subject to a 10-percent penalty.