Saving for your college education early is essential in the quest to actually affording it. And if you're lucky enough to have your guardians and relatives willing to help with college costs, the 529 tuition savings plan was the surest route to take. If you aren't familiar, the 529 tuition savings plan was designed to help parents begin saving for college by providing an investment option that allows them to withdraw funds for qualified educational expenses tax-free...or at least that was the case.
According to the Wall Street Journal, President Obama has proposed "rolling back" tax benefits of 529 college savings plans and "repeal tax incentives going forward" for Coverdell Education Savings Accounts. For now, both plans allow parents, grandparents or anyone looking to help fund a kid's education to contribute after-tax dollars into accounts that grow tax-free; when money is withdrawn for educational expenses, there’d be no tax either. President Obama has suggested changing the law so that withdrawals would be taxed as ordinary income. Yikes. Why the change? The administration has labeled the plans “inefficient” and complained that the benefit accrues too heavily toward higher-income Americans. (For more on this story, click here.)
With the plans as popular as they are – more than 12 million children from 7 million households are currently benefitting – what negative affects could the proposed changes have? Would they affect you personally? Share your thoughts in the comments section.