Kelly Schmidt: Government Should Encourage College Savings, Not Punish It

President Obama’s decision to back down on his plan to end 529 college savings plans is good news.  But middle class families and their elected officials shouldn’t let their guard down.

Let’s be honest about what happened and why.

As many Americans know, 529 plans allow families to save for their child’s education by putting savings into a tax free investment account that collects interest.  As long as those savings are used to pay for college, the dollars remain untaxed.  The plans are extremely popular, with nearly 12 million accounts across the country.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#000000″ txt_color=”#ffffff”]”In North Dakota, we’ve shown that great things can happen when government trusts people more than programs.  The hard work and ingenuity of our citizens have made energy more affordable.  Why can’t our state and others do the same in education?”[/mks_pullquote]

What President Obama proposed in his State of the Union address was ending 529s – effectively raising taxes on the middle class – and using that revenue to help pay for other priorities including “free” community college.  Of course, with government nothing is “free” – the federal government’s attempts to make things affordable invariably make them more expensive.

Regardless, attacking 529s – and the middle class families who use them – was a shameful use of the bully pulpit.  Millions of middle class Americans, who resented being the targets of class warfare rhetoric, were enraged and made their voices heard.  Politicians in Washington got the message.  This week, members of the president’s own party went to him and said enough is enough.

Of course, another person who may have lobbied President Obama was Senator Obama, who voted to make 529 plans permanent in 2006.  Even though President Obama was for 529 plans before he was against them, we shouldn’t assume he will now be for them once again.

State treasurers, I believe, have a responsibility to repair any lingering damage done to 529 plans, and also to lead a more productive discussion about college affordability.

First, the institutions who offer 529s shouldn’t have second thoughts about innovating and offering new products.  Instead, they should press on in light of the public’s overwhelming support of the plans.

More importantly, young parents who work hard and take pride in putting money away for their child’s education should be applauded and supported rather than harassed and taxed.  Government should reward, not punish, anyone who is saving and contributing to a child’s education.

In North Dakota, we’ve shown that great things can happen when government trusts people more than programs.  The hard work and ingenuity of our citizens have made energy more affordable.  Why can’t our state and others do the same in education?

That’s a difficult question with no easy answers.  But it should begin with transparency and a serious and sober review of what is working in education at all levels.

The cautionary lesson for the president is the American people are eager to look to the states – and their own communities – for answers rather than Washington.  While 529 plans are safe and secure, this is just one victory in an important debate about how to make college truly affordable, and expand opportunity, for all.

Rob Port is the editor of SayAnythingBlog.com, a columnist for the Forum News Service, and host of the Plain Talk Podcast which you can subscribe to by clicking here.

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