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Legislation to Enhance 529 College Savings Plans

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Last week Congresswoman Lynn Jenkins (R-KS) and Congressman Ron Kind (D-WI) introduced H.R.529, legislation in the U.S. House of Representatives that would make 529 plans more flexible and remove some of the obstacles participants face while saving for college.

Specifically, H.R. 529 includes:

  • Making computers an eligible expense;
  • Allowing the redeposit of funds without negative tax implications in certain extenuating circumstances (e.g. a student gets sick at the beginning of the term);
  • Updating outdated accounting rules.

This week Senators Chuck Grassley (R-IA), Bob Casey (D-PA), Richard Burr (R-NC), Mark Warner (D-VA), Pat Roberts (R-KS) and Ben Cardin (D-MD) introduced similar legislation in the U.S. Senate.

Probably the most needed and exciting piece of this legislation is the provision to make computers an eligible expense. In today’s high tech world where the focus of education is on Science, Technology, Engineering and Math (STEM), it is hard to believe that electronic devices are not considered qualified higher education expenses. As more and more classes begin using e-books and cloud-based learning programs, it is clear that computers, tablets and mobile devices are at the heart of today’s college learning environment.

Innovation and creative solutions to our world’s most perplexing health, social and infrastructure challenges have and will come at the hands of students and professionals using technology. It is wonderful to see that this simple yet powerful fact is being recognized by our elected leaders and the pricy technology investments made by students will hopefully be a viable tax-deductible expense when using their 529 plan to cover these necessary educational costs.
Another big improvement to 529 plans as a result of this proposal is allowing for distributions to be re-deposited within 60 days of their withdrawal without a tax-penalty if students experience serious illness or sudden life circumstances that require them to take leave from their studies. There is no doubt that this is the right thing to do, as families save for years to put their children through college and should not be penalized for life events that are out of their control.

Lastly, this legislative blueprint calls for accounting updates that eliminate unnecessary paperwork for 529 plan administrators. Anytime you can reduce excessive operational procedures, the efficiencies gained only help reduce costs that can hopefully be passed along to customers, or in our case, to families looking to save for their children’s future.

Moving forward, we must do all we can to preserve and enhance the benefits of 529 plans. We strive to create greater access to higher education in our country and lower the student debt burden that now more than 37 million Americans experience every day.  We thank the leaders in the House and Senate for moving this legislation forward as part of a comprehensive plan to ensure students have the tools and resources they need to succeed both in and out of the classroom. We look toward swift action by Congress to pass these additional measures.

Written by Betty Lochner, Chair of the College Savings Plans Network (CSPN) and Director of Washington’s Guaranteed Education Tuition (GET) Program.

 

 

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