Putting four children through college would be a challenge for most families. Certainly it is for Jenny Clark and her husband, Michael, but they have made saving for their children’s college educations a priority.
For years, Jenny and Michael have put money in 529 college savings plans for each of their children (ages 2, 5, 6 and 8). The money grows over time and can be withdrawn without a tax penalty if the funds are used for expenses like college tuition and books.
“We first learned about 529 plans from my dad because he had been saving for my younger siblings,” says Jenny, a stay-at-home mom in Arizona. “I have three much younger siblings, all in college now, and they are all using fully funded 529s.”
Now, change may be coming to the 529 program. As part of the tax reform initiative, Congress may simplify the program and expand its uses. One House proposal would let families use 529 plans to save for a child’s K-12 education, as well as college expenses. Students could also use any remaining 529 funds to pay for job-training expenses in apprenticeship programs.
College costs today are increasingly daunting. According to the College Board, public college tuition and fees, plus room and board, average $20,000 per year — and that’s the “discount” rate for in-state students. At private colleges, these costs average more than $46,000.
Without prior savings, most middle-income families would be hard-pressed to cover these costs. For families at lower income levels, such expenses would be out of reach.
Why expand the 529 program to include K-12 expenses? It would give families — especially those without access to high-quality public schools — more options for helping their kids get into college at affordable prices. A quality K-12 experience can lead to college scholarships that bring postsecondary expenses within reach. Others may choose to focus their savings on higher education.
Either way, families will have more choices over what to do with their own savings under Congress’ 529 proposal. Parents (and grandparents and other family members) who deposit their own money in 529 plans should have options about how their savings can be used to help their youngsters.
“529 plans have put the idea that college is going to be accessible for us because we can contribute monthly to a 529 account,” Jenny says. She explains that relatives contribute to her children’s accounts as gifts at birthdays and other holidays.
The U.S. tax code is complicated, and lawmakers have few ways to give families and students more learning options through changes to tax laws. But since 529 plans include federal tax incentives, lawmakers can expand college savings plans as they change other parts of the nation’s tax laws.
Expanding 529 college savings plans is not the only alternative to help students from middle- and low-income families. State and local officials in more than half of the states have enacted private K-12 scholarship options. Many of these scholarships — such as those in Milwaukee and Florida — are exclusively for low-income students. Nearly every state allows teachers and community leaders to create independent public charter schools, many of which serve students from low-income families in urban areas.
States, not the federal government, should keep developing innovative ways for students to find a great education. Yet if Congress can give parents more ways to use their own savings to help their children learn, it should do so.
As for Jenny Clark, she sees the opportunities available through more flexible 529 plans. “I think expanding [529 plans to include] K-12 expenses would be incredible,” Jenny says. “It’s amazing how fast the money grows when you put a little aside.”
This piece originally appeared in The Daily Times