Congressman Davis, Treasurer Frerichs Work to Strengthen 529 College Savings Plans
Bi-Partisan Effort to Make Saving for College Easier
U.S. Rep. Rodney Davis (R-Ill.) and Illinois State Treasurer Michael Frerichs (D-Ill.) made a stop at the University of Illinois Urbana-Champaign (UIUC) campus today to raise awareness about state and federal efforts to strengthen 529 college savings plans and improve access to affordable education.
Davis and Frerichs discuss bipartisan efforts to make saving for college easier for Illinois families.
Davis is a leader in federal efforts to expand, modernize, and strengthen 529 college savings plans, ensuring low and middle income families can help their children pay for college. Last year, the House passed H.R. 529 to allow 529 plans to be used to purchase a computer and internet access while enrolled in an educational institution. Davis also co-sponsored a bill (H.R. 3170) to allow 529 plans to be used to help pay off student loan debt and is working on introducing legislation to encourage employers to match the college savings by employees, provide a tax credit to those who save, and enable families with disabled children to rollover a 529 account into an ABLE account.
“As a parent with one college student and two on their way very soon, I understand the importance of saving for college and how difficult it can be for families,” said Davis. “529 savings plans allow parents to plan for their children’s futures. Treasurer Frerichs and I want to make sure as many families as possible can take advantage of these plans. There are simple changes we can make now to modernize these accounts and make them more beneficial to low and middle income families.”
Frerichs, who serves as the Trustee for the three Illinois 529 College Savings Plans, is working to pass legislation that extends the state’s employer contribution tax credit for matching funds in an employee 529 college saving account past the 2020 sunset. House Bill 5882 also increases the maximum annual credit from $500 to $1000 per employee.
“We are proud to work with Congressman Rodney Davis to make saving for college easier for Illinois families,” Frerichs said. “Every year, the cost of college tuition increases at least two times the rate of inflation. As students graduate with more debt, it is important for us to strengthen our 529 college savings plans to help families prepare for their child’s education.”
Background: 529 plans are designed as “qualified tuition programs” under Section 529 of the Internal Revenue Code. They are different than pre-paid tuition plans. Currently, more than 425,000 residents hold a Bright Directions or Bright Start account. Specifically, there are over 200,000 accounts and close to $4 billion in the Illinois advisor-sold 529 plans. Bright Start was created in 2000 as a way to help families save in the midst of increasing tuition costs. Bright Directions was created in 2005 to help families select from a wider investment lineup.
Money in a 529 college savings account can be used at eligible educational institutions, including public and private, two-year, four-year colleges and universities and certain technical and vocational schools.