New America Commends Obama Administration for Committing to Improve 529 Plans

Washington, D.C. -- The importance of saving for college has increased dramatically in recent years. Tuition costs have vastly outpaced growth in both family income and federal student aid commitments over the past several decades. At the same time, the importance of receiving a postsecondary education has become paramount in getting ahead in today's global economy. The result has been unsustainable levels of debt for some students, while access and completion rates for low-income students have suffered. Research shows that even small amounts of targeted savings can lead to behavioral changes for low- and middle-income families. Giving families incentives to save for college could have a real impact on college enrollment and completion rates.
 
Today in Syracuse, NY, Vice President Joe Biden hosted a forum on college access and affordability with Treasury Secretary Tim Geithner and Education Secretary Arne Duncan. The panel, a part of the Obama Administration's Middle Class Task Force, discussed ways to make it easier on middle-income families to afford the rising cost of postsecondary education. In tandem with the discussion, the Treasury Department--at the behest of the Vice President--released an interim report on the effectiveness of 529 college savings plans. 
 
The College Savings Initiative, a joint venture between New America and the Center for Social Development at Washington University in St. Louis, commends the Vice President and the Administration for focusing on the effectiveness and potential of 529 plans, and believes that improvements to these plans can have a broad impact on middle class families, as well as families farther down the income ladder.
 
"College savings plans have been around for nearly two decades now, and while they were originally intended to help moderate-income families save for college, we believe that they can be helpful in increasing college access and affordability for families at every income level," said Jackie Williams, Director of the College Savings Initiative at New America.
 
College savings plans were added to the Internal Revenue Code in 1996 and were given similar tax treatment to retirement savings vehicles in 2001. Forty-nine states, the District of Columbia, and an independent private consortium currently sponsor plans.
 
"States have a lot of leeway to innovate with their plans. The key for the Federal government is to understand the best state innovations to inform federal policy, and also encourage other states to create incentives and remove barriers to saving for higher education, especially for lower-income populations," Williams explained.
 
According to Treasury Secretary Geithner, "These plans can be an immensely effective way for Americans to save for college... These accounts are not being broadly used by Americans who could benefit from them. For example, only 5 percent of families with children in the middle of the income distribution have 529 accounts, while nearly one third of those in the top 5 percent of the distribution have them." Geithner's Treasury Department has proposed "a series of recommendations to expand their use, lower investment fees and make them safer for Americans across a wide range of incomes."
 
Improvements to the 529 platform can take many forms, including matching grants for families below a certain income level; enrolling students in college savings plans at birth or kindergarten; facilitating enrollment at tax time and through the workplace; and exempting 529 assets from financial aid and federal assistance eligibility calculations.
 
The following New America experts are available for interviews to discuss today's summit and the Obama Administration's commitment to improve college savings plans:
 
Jackie Williams, Director, College Savings Initiative, New America Foundation
Mark Huelsman, Program Associate, College Savings Initiative, New America Foundation
David Newville, Policy Analyst, Asset Building Program, New America Foundation
 
For interview requests, please contact Kate Brown at 202-596-3365 or brown@newamerica.net.

About the New America Foundation
The New America Foundation is a nonprofit, nonpartisan public policy institute that invests in new thinkers and new ideas to address the next generation of challenges facing the United States.  

Learn More About: David Newville, Jacqueline T. Williams, Mark Huelsman
Related Programs: Asset Building Program, College Savings Initiative