In an article published in the Jan.29 edition, Our Weekly mistakenly wrote that President Barack Obama would scrap his proposal to provide free junior college to qualified applicants.
Instead what the president has done is drop a proposal to tax 529 college savings plans. According to the web site savingforcollege.com, a 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.
Under federal law, investments in the plan grow tax-deferred, and distributions to pay for a beneficiary’s college costs come out federally tax-free. Depending on the state, you may deposit up to $300,000 per beneficiary. These plans allow tax-free distribution as long as the proceeds are used towards approved college costs—typically tuition, fees, room, board and other required supplies.
Another kind of 529, prepaid tuition plans, allow savers prepay for future tuition and lock in current prices, but they typically do not cover other expenses.
President Obama had proposed taxing the saving plans, which according to an article in Forbes (correcting most other media reports to the contrary) are mainly used by families with incomes below $150,000 a year. The average account balance is less than $21,000. Some 7 million families own 12 million 529 accounts for their kids.
Republican lawmakers as well as an increasing number of Democrats, including House leader Nancy Pelosi urged the president to withdraw the plan.
OW’s article mistakenly linked the 529 proposal to providing free community college tuition, which is still being touted by the Obama administration.
