529 Plans

529 plans
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A 529 plan is a tax-advantaged investment plan designed to encourage families to save for future college expenses. The plans, named after Section 529 of the Internal Revenue Code, are operated by states, private sector partners and educational institutions. The two different types of 529 plans are prepaid tuition plans and college savings plans. Under both plans, funds grow income-tax free and, when withdrawn, are exempt from federal income taxes if used for qualifying higher education expenses. If withdrawn funds are not used for higher education expenses, they are subject to federal income taxes plus a 10 percent penalty on earnings.

Texas’ first prepaid tuition plan, which is constitutionally backed, stopped accepting new enrollees in 2003, but still has active participants who expect to use their plan to fund their college education. In 2008, Texas created a new prepaid tuition plan, the Texas Tuition Promise Fund, to replace the previous plan. The new plan places the risk on colleges and universities, not on the state. Public institutions must accept prepaid tuition credits even if the value of the credits is less than current tuition prices. Texas is the only state to structure their prepaid tuition plan in such a way.

Solutions:

Texas Constitution
Code – The Texas Constitution
Article – 7 Education
Section – 19 Texas Tomorrow Fund

Texas Match the Promise Foundation

Vox – 12 states let you pay college tuition years in advance. But it’s not always a good idea

Houston Chronicle – Cuts to pre-pay Texas college fund anger parents

Slate – The “529” Rip-Off

LA Times – 529 college savings plans have their downsides

The Week – 529 college savings plans are everything that is wrong with American policy

New York Times – College Plans You Thought Were Safe

New York Times – Taxing 529 College Savings Plans: A Plan That Went Awry

New York Times – This Little Piggy Went to College

New York Times – New York City Seeks to Jump-Start College Savings by Giving Cash to Kindergartners’ Parents

Texas Observer – State College Tuition Guarantee Questioned

The Atlantic – The Rich, the Poor, and Whether Tax Policies Live or Die

CNBC – 529 plans: The real users and what they sock away

Huffington Post – 529 College Savings Plans Primarily Benefit Wealthy: Government Accountability Office Report

Reuters – Are 529 plans really just a tax break for the rich?

CBS – Why 529 Plans are Great for the Wealthy

Demos – Obama’s Plan to Help Students Pay for College

Demos – Education Subsidies for the Rich

Forbes – Profiting Off The ‘Invisible’ Benefits Of A 529 College Savings Plan

Next City – NYC to Start College Savings Pilot Program

Governing – Will San Francisco’s Kindergartener Bank Accounts Catch On?

Aspen Institute – Children’s Savings Accounts

Cuyahoga County launches college savings account program

WBUR – Boston Picks 5 Schools For College Savings Pilot Program

Boston Globe – City to help kindergarten students save for college

CNN – How low-income parents have saved $1M for college

CBS – Every Kindergartner Gets $50 Saving Account In Oakland Leader’s Proposal