By Mitch McConnell, U.S. Senator:
With another school year well underway for Kentucky’s students this fall, it is important they and their families understand the full range of choices available to them to make a higher education more affordable and accessible. One of those options is the 529 college savings plan, which is a tax-advantaged savings plan that is designed to encourage Kentuckians to pay for future college costs.
529 plans are so called because they are authorized by Section 529 of the Internal Revenue Code. They allow families to save tax-free for college expenses. In 2001, I authored the Setting Aside for a Valuable Education (SAVE) Act to ensure that 529 plans would be 100-percent tax-free at the federal level. This measure was included in a larger tax package that became law, but only temporarily. In 2006, I helped make the tax benefits under these accounts permanent.
Nearly all 50 states, including Kentucky, offer 529 college savings plans. According to a report recently released by the College Savings Plans Network, there are close to 12 million open accounts, with total assets of more than $224 billion.
To expand Kentucky families’ access to 529 plans, and make it even easier for them to pay for their child’s higher education, I was proud to offer the Enhanced 529-Setting Aside for a Valuable Education, or Enhanced 529-SAVE, Act on the floor of the U.S. Senate last month.
The Enhanced 529-SAVE Act will make 529 plans more accessible by encouraging employers to contribute to an employee’s 529 plan. My bill would exclude up to $600 of an employer’s contribution from an employee’s gross income. This will help families and individuals save more for higher education expenses.
The Enhanced 529-SAVE Act will also help lower-income families and individuals save money for college by allowing the individual that contributes to the 529 plan to qualify for the Saver’s Credit, which is an income-based, non-refundable tax credit up to $4,000.
These are powerful savings tools that help students and their families afford college.
Not only do we need to make college more affordable, we need to make sure that our youngest and brightest are graduating into a strong economy. The Obama Economy has been particularly hard on our nation’s young adults.
One of my top priorities as Kentucky’s senior senator is to continue to fight for job creation proposals so that the students who decide to invest in a degree are better able to get good-paying jobs.
I will continue to focus on real solutions that help students financially prepare for school, give them the support they need to obtain a degree and help create an economic environment that provides them with the career opportunities they seek once they graduate.