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Reps. Jenkins, Kind Introduce Legislation To Expand, Strengthen 529 College Savings Plans

WASHINGTON, D.C.– Today, Congresswoman Lynn Jenkins (R-KS) and Congressman Ron Kind (D-WI) introduced H.R. 529. This legislation would expand, modernize, and strengthen tax-free 529 college savings plans. The importance and popularity of 529 college savings plans have grown substantially as more middle class families have used them to save for college. Since the bipartisan creation of Section 529 in 1996, these plans have gone from nothing to nearly 12 million accounts and resulted in college savings of more than $225 billion.

“Saving for our children’s education is one of the most important, and at times, most difficult aspects of being a parent,” said Rep Jenkins.“This bill would expand 529 plans to further promote college access and eliminate barriers for middle class families to save and plan ahead. It would also modernize the program by allowing students to purchase a computer using their 529 funds. These are particularly important goals as college costs continue to rise and students are struggling with extreme amounts of student loan debt. This bipartisan, sensible legislation strengthens an extremely popular savings plan for middle class families so that all American’s have the opportunity to send their children to the college institution of their choice.”

“As the representative of 14 colleges and universities across western and central Wisconsin, one of my top priorities is working to keep college affordable,” said Rep. Kind.“Helping students attend college ultimately makes America more competitive in the global marketplace, but with rising tuition costs and the growing crisis of student loan debt, we need to use every tool we can to help families afford higher education. This commonsense, bipartisan legislation promotes college access and proactively encourages families and students to save in advance, while eliminating perceived barriers to savings.”

What They Are Saying:

Betty Lochner, Chair of the College Savings Plans Network: “Representatives Lynn Jenkins and Ron Kind are to be commended for their support of American families striving to save for the future costs of higher education. This legislation will provide additional flexibility and make college savings plans more user-friendly for families to save for college. We are delighted with the leadership that Representatives Jenkins and Kind have exhibited and look forward to an ongoing partnership with them and their colleagues in Congress as we work to improve Section 529 plans to help all American families save and use these plans for their children’s higher education expenses.”

H.R. 529 makes three important improvements to 529 Savings Plans, enhancing what is a successful model for helping students attend college:

Clarifies that computers are a qualified expense for 529 account funds:This bill permanently clarifies that computers are qualified expenses, reflecting the modern reality that a computer is a necessity for today’s college student. 

Removes all distribution aggregation requirements: The current rules were designed for when earnings were taxed to the beneficiary at distribution.  However, since 2001 the tax treatment changed and there is no policy need for such aggregation. This would eliminate an unnecessary paperwork burden for 529 plan administrators and there should be no cost to this proposal. 

Re-Deposit of Refunds:Permits the re-deposit of refunds from colleges without taxes or penalties, provided that it occurs within 60 days of the student withdrawing from the college.  For example, this situation would occur when a student withdraws early due to illness or other reason and obtains a refund from the school.  Currently, the refund would be subject to income tax on the earnings and a 10% penalty

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