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President's Proposed Removal of 529 Plan Tax Benefits Harms Families
Thursday, January 22nd 2015
President Obama's proposal to remove federal tax cuts from 529 plans eliminates the key benefit of these popular college savings vehicles.
Pittsford, NY January 22, 2015
Savingforcollege.com, the leading source of unbiased information on college savings plans, calls on Congress to oppose the White House’s proposal to remove essential tax benefits in 529 plans. The benefits, in place since 2001, allow for 529 plan withdrawals to be taken tax-free when used to pay for qualified higher education expenses. Since 2001, assets in 529 plans have grown from $19.4 billion to $254 billion, proving that it has been a compelling incentive for families to save.
529 plans have helped millions of American families reduce their dependence on student loans over the past 15 years. Today, there are approximately 12 million 529 plan accounts with an average value of $19,774, and it’s estimated that over 1 million currently enrolled college students are using funds from a 529 plan to help cover their college costs.
“President Obama says he wants to help middle class families, but his proposal to tax 529 plan earnings will do just the opposite,” says Marcos Cordero, CEO of Savingforcollege.com (@saving4college). “Taking away this benefit makes 529 plans much less attractive to the average family.”
Savingforcollege.com receives over 3 million visitors annually who are looking for information on ways to save and pay for college. Surveys administered by the website reveal that 529 plans are growing in popularity among middle class parents and grandparents and are becoming the cornerstone of their college savings strategies:
- 64% intend to open a new 529 plan within the next 12 months. They are solidly middle class – 73% have household incomes under $150,000 – and “Federal Tax Benefits” was the top reason they gave for wanting to open a 529 plan.
- 30% are currently using a 529 plan to save for college, and almost half of these families expect to put 75% or more of their total college savings into their plans.
College costs have increased at a rate rivaled only by healthcare. According to the Annual Survey of Colleges by The College Board, the public four-year sector experienced a 17% inflation-adjusted increase in tuition and fees over the last ten years. “Rising college costs mean more students will have to resort to loans if they don’t have savings. Let’s not discourage families from utilizing one of the few tools to combat future debt. We should be saving for our children’s future, not taxing it,” said Cordero.
Savingforcollege.com is encouraging families to speak out against the proposal by providing instructions on how to reach out to congressional representatives. Students, parents and grandparents can voice their concerns by visiting http://no529tax.org and joining the Twitter discussion using #no529tax.
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Savingforcollege.com has been the country's leading independent authority on 529 college savings plans since 1999. The college savings website compiles and analyzes data to provide parents and financial professionals with resources to help them understand how to meet the challenge of increasing higher education costs.
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