Congress takes on 529s, targets student debt

Enhancement of savings vehicles a priority in Washington, but some states aren't on board

Mar 9, 2019 @ 6:00 am

By Mark Schoeff Jr.

While the Financial Industry Regulatory Authority Inc. examines whether brokers are recommending 529 plans that are too expensive, Congress wants to enhance the savings vehicles.

A series of bills, supported mostly by Republicans, would allow 529s to cover the costs of apprenticeship programs and home schooling, and additional educational expenses beyond tuition. They also would enable account holders to tap 529s to help pay down student debt for a sibling of the beneficiary.

(More: What drove Finra's new 529 share class initiative?)

The changes would follow major modifications introduced by the 2017 tax-reform law, which enhanced 529s to cover tuition for K-12 education. A few recently introduced bills also target student debt.

529 expansion bills

The Family Savings Act (H.R. 1084): Would expand 529s to cover apprenticeship programs, home-schooling expenses and student loans.

Enhancing Educational Opportunities for Home School Students Act (H.R. 65): Would expand 529s to cover home schooling.

Student Empowerment Act (S. 157 and H.R. 621): Would expand 529s to cover a range of educational expenses in elementary and secondary school.

Student loan bills

Employer Participation in Repayment Act (S. 460 and H.R. 1043): Would allow companies to contribute up to $5,250 per year tax-free to their employees to reduce student loan balances.

Student Loan Repayment Assistance Act (H.R. 655): Would encourage employers to offer student-loan assistance by giving them a 10% tax deduction for repayments up to $6,000 annually.

Graduate Student Savings Act (S. 448): Would allow graduate students to deposit funds from their stipends or fellowships into individual retirement accounts.

State-level action

There's also activity on the state level. On March 4, more than two dozen states launched a campaign, "For Their Future Movement," to limit college debt for new generations, according to a statement.

Some states, however, are resisting the expansion of 529s. A bill in the Oregon legislature would allow the state to ignore federal rules extending the program to cover K-12 education.

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