Scholarship News

Don’t Tax My 529 College Savings Plan, President Obama!


January 27, 2015
by Suada Kolovic
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.

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.

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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looking to help fund a kid's education to contribute after-tax dollars into accounts that grow tax-free; when money is withdrawn for educational expenses, there’d be no tax either.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.

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Discuss

Share your thoughts and perhaps thousands of students will benefit from your unique insight on the subject!



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Citlali C  on  1/30/2015 9:45:30 AM commented:

This comment in specifically aimed for Natalie J and all of the other racist narrowed minded people out there. Those so called "illegal aliens" contribute to this society also. Believe it or not, thanks to them you get to see nice neighborhoods with mowed lawns, your fresh vegetables, kids get taken care of by their people, they clean, are robbed, mistreated, and often have no rights or benefits. Yes, they are here illegaly, but they still have constitutional rights. I'm sorry you lost your dad. I'm also sorry that your mom has to work extra hard, but those are the sacrifices we must make. Life is tough and no one cares about your problems, so suck it up, get good grades, work for YOUR college education, and contribute to society. Your family is not the only one suffering through this. Many undocumented people get cheated, robbed and actually don't have as many benefits as you think. Blaming other people is not the answer. Maybe we should all raise a fund to send you to college, in order to open your mind a little and get rid of all of that ignorance that you have in there.

Jaecee C  on  1/28/2015 5:14:18 PM commented:

As much as I support President Obama in a number issues, I disagree with him on this one. Like many of the people here, I will also be graduating with a mountain of student debt. A few years down the road, I am certain that I will be starting a family, and with that, comes my responsibility to putting money aside for my children's education, which has become more and more expensive through the years. Now, the good thing is President Obama has heard the voices of current and former students, parents, and grandparents to abandon this proposal. New York Times had just reported on it and I am happy with that decision.

Natalie J  on  1/28/2015 3:39:31 PM commented:

Its frustrating to see my mom work 60 hours to pay off her student loans and save for my college education so I don't have such burden, only to have Robin Hoodobama steal it from us to give to someone else. My mom learned from her own experience that college is expensive and student loans are a serious burden. So instead of rewarding her for her insight and living the American Dream of making a better future for your children, she will be penalized for her hard work. When my dad died, she did not go to government and say you owe me, instead she worked harder, sacrificed and made a good life for us. She earned every bit of her education and every dollar she makes is through blood, sweat and tears. Where is my incentive going to be to work so hard when I know it will be taken away from me by the America that was supposed to be the land of opportunity. Yeah, it's the land of opportunity if you are an illegal alien, or just don't feel like working hard.

Alissa H  on  1/28/2015 10:13:49 AM commented:

Just another atrocious way President Obama attempts to micro-manage the working class. My husband and I opened 529 accounts for each of our daughters before they graduated from high school and in one lump-sum, meaning we didn't realize the minimal tax break (credit) of $1,000 per account. We deposited after-tax dollars into that account to start. Now the withdrawals will also be taxed??? Even if it's just the earnings, I'm tired of President O making us hardworking Americans continually fund social programs for the many who find it easier to stay home and put a hand out. He may get warm and fuzzy feelings over giving to those who he believes are needy, but I don't. Maybe it's time he turn the microscrope down and bore into WHY there are low-income people out there and start restricting social programs before he keeps taking our hard-earned money. It could be because the hard-working ones keep working. What happens when we all throw in the towel and say, "Hell, I'm tired of being taxed--just send me free money, too." Damn right I'll write my Washington representatives. Let's hope someone there can shout from the top of the mountain how wrong it would be to tax 529 withdrawals. And let's hope others there listen. It's time to do something NOW! (Written by Arlene H., mother to Alissa)

Charlotte H  on  1/27/2015 7:01:19 PM commented:

This is tragic. My husband and I have decided to avidly save for our girls because we have struggled to pay our way through college. We will both be graduating with an outrageous amount of debt. The alternative: No education... which meant no advancement. To offer our girls help so that they don't have to struggle as much as we have we started saving for them. They know that their Christmas and Birthday presents are smaller now because we are trying to put more money away for them. It will be very very sad if what we are working so hard to save ends up being taxed again. We pay taxes on what we earn and we are now choosing to save that, it's a shame that it could be robbed of it's purchasing power for our girls' education.

Carina F  on  1/27/2015 5:46:45 PM commented:

I am planning to write to our senators and explain the crucial to keep 529 plans tax free. This is the only way many of us ca n save for our children's education. We need to educate our children without burdening them with so much debt .

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