Bill Cuts Taxes for Families Who Save for College & Rolls Unused Savings into Retirement Accounts
WASHINGTON – U.S. Senators Maggie Hassan (D-NH) and Susan Collins (R-ME) introduced bipartisan legislation to help parents in New Hampshire, Maine, and across the country save for college. The bipartisan Helping Parents Save for College Act would encourage families to invest in a 529 education savings account, which can be used to pay for a two or four-year college education or vocational school. The bipartisan legislation would provide tax cuts for families who save for college and allow families to roll unused college savings into a child’s retirement account.
“The high cost of higher education is hurting families’ bottom lines and standing in the way of students’ success,” said Senator Hassan. “That’s why Senator Collins and I introduced bipartisan legislation that takes commonsense steps to make it easier for families to save for their child’s education, including by cutting taxes for families who put away money for college. I urge my colleagues to join us in supporting this bill that will help ease the cost of higher education, strengthen our economy, and enable more young people to gain the skills that they need to thrive.”
“Education plays a vital role in opening the doors of opportunity to all Americans, but the rising cost of a college education threatens to close those doors to many families across the country,” said Senator Collins. “529 plans are a great option for parents to save for college expenses, but uncertainty about whether their children will choose to pursue post-secondary education years in the future can be a deterrent to opening and investing in an account. Our bipartisan bill would address this barrier by improving the flexibility of 529 plans for low- and middle-income households, helping more parents to financially prepare and more children to achieve their dreams.”
Studies have shown that young people who have savings accounts – even with modest balances – are more likely to attend and complete college. The bipartisan Helping Parents Save for College Act would incentivize lower and middle-income families to invest in 529 college saving accounts by providing a tax credit that covers 50 percent of low- and middle-income families’ contributions. It would also allow families who do not use the funds in their 529 account to roll those dollars into a Roth IRA retirement account – which means that if a child does not choose to attend college, families can still take advantage of the savings.
The Helping Parents Save for College Act builds on Senator Hassan and Collins’ work to expand higher education and workforce development opportunities to more Americans. The 2022 government funding bill that was recently signed into law included $20 million that Senators Hassan and Collins worked to secure to help students at colleges in rural communities meet their education goals and access employment opportunities. Senators Hassan and Collins also joined in introducing the bipartisan Jumpstart Our Businesses By Supporting Students (JOBS) Act, which would expand the Pell Grant to cover workforce training programs. Senator Hassan pushed for an increase in maximum Pell Grant award by $400 in the latest government funding bill, which marks the largest increase in more than a decade.
See below for statements of support from the University of New Hampshire, the Alfond Scholarship Foundation, and the Finance Authority of Maine.
“The University of New Hampshire is committed to providing affordable access to a high-quality university education. We are proud to support the Helping Parents Save for College Act as a way to increase utilization of the 529 College Savings Plan and encourage families to begin considering and saving for college early. We are grateful to Sen. Hassan and Sen. Collins for their work to expand access to the ‘saver’s credit’ and provide an alternative investment option for unused 529 funds. This legislation both incentivizes saving and addresses a primary concern expressed by parent's considering 529 plans,” said Dr. Pelema Ellis, Vice Provost of Enrollment Management at the University of New Hampshire.
"We are excited by and grateful to Senators Collins and Hassan for sponsoring this bill to extend the Savers Credit to 529 education savings plan contributions, and to also allow families to roll unused funds in a 529 plan into an IRA," said Colleen Quint, President and CEO of the Alfond Scholarship Foundation. "We know that families care about their children's future and that they want to build on the $500 Alfond Grant that we award to every Maine baby. We also know that families aren't always sure what the future will hold and sometimes hesitate to take that step to open an account and save because they might want or need some flexibility down the road. This bill provides just that kind of reassurance that funds invested for their child's future will, indeed, be available for their future even if all of the resources saved are not needed for education. Programs like ours across the country are looking for ways to encourage families to take that first step in saving for their child's future. This bill will help more families take that step with confidence."
“As administrators of Maine’s Section 529 education savings plan, NextGen 529®, FAME supports these proposed changes. We appreciate Senator Collins’s efforts to make 529 education savings accounts more flexible and attractive to consumers,” said William Norbert, FAME Governmental Affairs and Communications Manager.
The bill is also supported by the College Savings Foundation, College Savings Plans Network, Fidelity Investments, National Association of State Treasurers, and New Hampshire Higher Education Assistance Foundation (NHHEAF).
To read the bill text, click here. For the one-pager, click here.