An economic case for school choice
Congress has a chance to make saving for college a lot easier
As back to school season, September is marked by heightened attention to education. To further this mindset, The College Savings Plans Network also recognizes September as college savings month to highlight the importance of saving for higher education expenses. With recent college finance statistics essentially screaming for the need to save, this awareness month couldn't be more timely.
According to the College Board, the average total cost at public four-year institutions is $20,090 for in state, $35,370 for out of state, and $45,370 for private institutions. Meanwhile, the Pew Research Center reports that Americans owe more than $1.3 trillion in student loans. These striking figures can subject anyone to sticker shock, but they can fortunately be combatted by saving.
There's a certain phrase I'm known to use when talking about saving for college: "529 plans are the best way to save for a child's education, period, end of sentence." Not only do savings in 529 plans grow free from taxes, but withdrawals remain tax-free when used for qualified higher education expenses like tuition, room and board, fees, books, supplies and more. Furthermore, many states offer a state income tax deduction or credit for contributions to a 529 plan. As college savings month comes to a close, I encourage families to consider the value of higher education and to prepare for it the smart way, with a 529 plan.
An incredible addition to this year's College Savings Month was the introduction of a new bill designed to make higher education more affordable, known as the Boost Saving for College Act. Presented by Sens. Richard Burr (R-N.C.), Bob Casey (D-Pa.) and Lisa Murkowski (R-Alaska), the bill would provide critical new options for 529 college savings accounts to enable more American families to save more for college.
The Boost Act would incentivize employers to match the college savings of their employees, allow 529 savings that aren't needed for college to be rolled over into a Roth IRA, and enable families with a disabled child to rollover unused funds from their 529 account into an account under the Achieving Better Life Experience Act.
Notably, the Boost Act would also extend the saver's credit, a tax credit available to low and middle-income families that provides a retirement savings match of up to $1,000 for single filers and $2,000 for joint filers, to contributions an individual or family makes to a 529 account, and therefore boost the savings they can put away for college.
This proposed enhancement would add to existing features of 529s designed to assist low and middle-income families. For example, many plans have reduced their minimum initial contributions to be as low as $15 to $25, while others have removed initial minimum contributions completely. In addition, outreach programs targeted to a broad array of families have been enacted across the country to raise awareness of 529 plans and the importance of higher education.
Due to this bill's aim to make 529 plans more flexible, and to further reassure low and middle-income families to save for higher education, the College Savings Plans Network firmly stands behind it. These are common sense measures that would help put a college degree within reach of more children. We encourage our congressional leaders to support the Boost Saving for College Act and ultimately boost the future, confidence and dreams of tomorrow's leaders.
Young Boozer is chairman of the College Savings Plans Network. He also serves as treasurer of the state of Alabama.