The D.C.-based New America Foundation and the Center for Social Development at Washington University in St. Louis have announced a new initiative designed to improve so-called 529 college savings plans in order to give more individuals the opportunity to attend and complete college.
Named after the section of Internal Revenue Code that describes them, state-sponsored 529 college savings plans were established to encourage families to save money for postsecondary education. Money contributed to the plans accrues interest free from federal and state taxes, and contributions are tax deductible in most states. However, low- and moderate-income families, who have the most difficulty saving for their children's education, have yet to realize the full potential of the plans.
With funding from the Lumina Foundation for Education and the Bill & Melinda Gates Foundation, the College Savings Initiative will examine new ideas for 529s, including how the plans might connect to federal tax and student aid policies and the possibility of opening a 529 for every child when they enroll in kindergarten.
"Saving money is not easy, but research shows that many people can save when they have incentives and a way to do so," said CSD policy director Margaret Clancy. "More low-income families may save with well-designed 529s and incentives. We will study 529 innovations to see which ones are effective. This will inform 529 policy so that it can benefit families of all income levels."