The comprehensive tax reform package passed by Congress last year included an amendment that expanded tax-advantaged 529 savings plans to include K-12 tuition at public, private, and religious schools. This represented a monumental and positive shift for 529 plans, which were previously limited to higher education expenses and had gone 20 years without any major policy innovation.
With the introduction of Sen. Ted Cruz’s Student Empowerment Act, Congress has yet another opportunity to expand and strengthen 529 plans across the country. This bill would expand eligible expenses for K-12 students to new categories like tutoring services, testing costs, and textbook purchases. It would also grant homeschoolers with equal access to 529 plans for their educational expenses and allow the plans to be used by families of children with disabilities for educational therapies.
Expanding the flexibility of 529 plans also helps to establish a culture of savings for all students from kindergarten all the way through college. Parents who sign up for an account with K-12 tuition, homeschool expenses, or tutoring in mind set themselves up for future financial success by establishing education savings habits early on.
I know from firsthand experience administering Missouri’s successful 529 expansion to K-12 tuition that parents, educators, and administrators are thrilled about the plan’s evolution and the opportunities that have come with it. Missouri’s MOST 529 plan has seen tremendous growth since its expansion, indicating increased interest in the program as result of the change. Since January, well more than 8,000 new MOST 529 accounts have been opened, and more than $140 million in new contributions have been made.
Some critics have argued against making 529s more flexible. Those arguments rely on bad math and a blatant disregard for the empowerment education can provide. No child’s future should be determined by which ZIP code they were born in, which is why I believe we need to focus on empowering students and making quality education more accessible, not maintaining the bloated size of government. This common-sense legislation focuses on making sure education savings plans give students their best chance at academic success.
State-based 529 plans offer an important opportunity for us to invest in the education of the next generation. Any action taken to strengthen or grow these programs will have a ripple effect that will create positive workforce development and financial empowerment outcomes for decades to come.
The Student Empowerment Act is a smart way for Congress to let states continue to build on the momentum education savings plans have gained since the end of last year. By giving parents and students the power to choose the educational path that best fits their needs, modernized 529 plans can act as a catalyst for greater access to educational opportunity for the next generation of students.
Eric Schmitt is the 46th Treasurer of the state of Missouri and administers Missouri’s MOST 529 Savings Plan.
