Middle class families all across the country use 529 education savings plans to invest in their children’s futures.
These tax-advantaged 529s are tax advantaged savings accounts that allow parents to save and invest after-tax income for education costs. Any money earned through 529 investment is tax-free, making these plans a popular choice for parents looking to save for future education expenses.
529s are getting more popular as time goes on. In 2018, total investment in 529 plans reached an all-time high of $328.9 billion, and the number of total accounts rose to 13.6 million. As of mid-2018, the average account side is up to $24,153, another record high.
In 2017, the Republican-passed Tax Cuts and Jobs Act legislation included an amendment from Senator Ted Cruz (R-Texas) that expanded 529 savings accounts to cover K-12 expenses and religious school tuition. This expansion provided real relief for millions of American families and was big win for freedom in education.
Now, Congress has an opportunity to expand 529s even further. Sen. Cruz and Rep. Jason Smith (R-Mo.) recently introduced the Student Empowerment Act. For the first time ever, 529s could be used to cover homeschool expenses, student loan expenses, books, tutoring, testing fees, and educational assistance for students with disabilities.
Crucially, the legislation expands 529s to cover apprenticeship expenses as well. This expansion would help alleviate the skilled worker shortage in our country by allowing 529 funds to be spent on apprenticeship costs. As with a traditional college, there are many ancillary expenses associated with apprenticeship programs. This bill levels the playing field between students and apprentices by allowing apprentices to use 529 funds to cover these costs.
All of these reforms were initially included in the SECURE Act, retirement savings legislation sponsored by Ways and Means Chairman Richard Neal (R-Mass.). Despite the legislation passing unanimously in the House Ways and Means Committee and having bipartisan support, Speaker Nancy Pelosi (D-Calif.) and Democrat leadership unilaterally removed key 529 provisions from the final bill. According to media reports, Democrat leadership caved to pressure from teachers unions and a “small handful” of radical leftists that oppose homeschooling.
Expanding 529s to include funding options for K-12 and religious school tuition was a big win for American families. Now, Congress has another shot to bring similar relief to even more families. Democrats should stand with American families, not a small minority of special interests, and ensure that 529s are strengthened.