WASHINGTON — Extra-long twin sheets? Shower caddy? Mini-fridge? Check, check and check.
It’s time to prep your high school grad for college. And while you might have list after list of college necessities, it’s also time to think about big expenses. That includes tuition, room and board, books and a computer. For the time being, your student’s 529 college-savings plan can pay for all of the mentioned, but if you don’t buy that computer by the end of the year, you might find the 529 won’t cover it anymore.
As part of the stimulus plan, funds from 529 accounts, named after the respective section of the Internal Revenue Service code, could pay for computers and other equipment. The college-savings bill, currently in the House Ways and Means committee, would make the stimulus provision on computers permanent as well as allow for two investment changes a year and extend the current Saver’s Credit to apply to college savings.
As of the end of 2009, families can only make one investment change per year. Because of the nature of the market, the Treasury allowed for two directional investment changes per year, a number backers of the college-savings bill, which is sponsored by Rep. Earl Pomeroy, D-N.D., says is better suited given the volatility in the market.
“While we don’t want people to move their money all the time, having two times when they can seems reasonable,” said Joan Marshall, executive director of College Savings Plans of Maryland who also sits on the board of the College Savings Plans Network, a nonprofit association that advocates for improving 529 plans.
The saver’s credit, as it stands, only applies for retirement savings contributions. It allows heads of households, married individual and married couples to take tax credits when they make voluntary contributions to retirement plans. Marshall said that giving this same credit for families who contribute to college savings would encourage low- and moderate-income families to save for college.
Jacquelyn T. Williams, director of the college savings initiative at the New America Foundation, a nonprofit and nonpartisan public policy organization, said that merely having money stashed away for college can make a difference in whether or not a child matriculates in post-secondary education. At a House discussion in mid-May, she said children with college funds are four times more likely to go to college.
With May 29 looming, Marshall said the College Savings Plans Network is using the date to raise awareness across the nation about 529 plans. Families have invested $134 billion in more than a hundred different 529 plans sold throughout the nation, but Marshall said many families are hesitant because of misconceptions surrounding these plans.