Does Democrats' call for free college put the need for 529 plans in limbo?

Proposals made by Democratic presidential candidates bring into question future need for 529 college savings plans

Sep 7, 2019 @ 6:00 am

By Mark Schoeff Jr.

Soaring college costs and burgeoning student loan debt have been major issues on the campaign trail for Democratic presidential candidates. Several have put forward plans that would make all or part of a college education free. Others have asserted that students shouldn't have to take on debt.

If a Democratic president is elected in 2020, and some version of these proposals becomes a reality, would it mean the end of the need for 529 college savings plans?

Mark Kantrowitz, publisher and vice president for research at SavingforCollege.com, said even if the cost of tuition or the size of student debt is slashed, there will still be a need to finance the nontuition aspects of paying for college, such as textbooks, room and board and other costs.

Additionally, legislative proposals on reducing the college bill tend to focus on public schools. Attending a private college or university will likely still be expensive.

"There are all these other expenses beyond tuition," Mr. Kantrowitz said. "There's going to be a role for 529 plans."

College costs are a challenge that won't be going away and 529s will still be standing after the political smoke clears, said Christopher Beste, an adviser at RFG Advisory.

"There's always going to be a need for 529s and a way for parents and grandparents to put away money for their kids' education," Mr. Beste said. "To me, they're kind of far-fetched political talking points at this point."

Indeed, the political challenge of passing legislation that would make college free is enormous, even if Democrats take over the White House and Senate, according to Mr. Kantrowitz.

"If you wait for this, you're waiting for Godot," he said. "It will never show. There are going to be enough Democrats with doubts that this won't get through."

Still, the fact that college costs are being debated in a presidential campaign is a good thing, said Paul Curley, director of college savings research at Strategic Insight.

"It highlights the importance of college financial planning broadly by having candidates talking about the topic," he said.

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