Earlier this month, Sen. Ted Cruz, R-Texas, successfully added an amendment to the tax reform bill that was simultaneously hailed and panned by the education reform crowd.
The tax reform conference committee was wise to leave the amendment in the final text of the bill.
Currently, under federal law and within the existing tax code, families can deposit funds into 529 savings accounts tax-free, but those funds can only be used exclusively for college expenses. Cruz's amendment allows for 529 savings accounts to be used for K-12 and college expenses, giving millions of parents and family members far more flexibility when investing in a child's future.
Critics of school choice are expected to oppose any sort of new education opportunities afforded to students, but in this particular case, some education reformers joined with the education establishment and criticized Cruz's amendment as tool to benefit the wealthy, or the upper middle class, without recognizing the greater potential and importance of 529 expansions.
Let's deal with the obvious first: Will a 529 expansion inevitably help some families already enrolled in private school? Yes, but so what? More importantly, 529 expansion provides a new pathway to families on the fringes of being able to afford a school for their child.
Despite the misconceived notion, most private schools are not elite institutions, catering exclusively to the wealthy, with ivy-clad towers akin to "Dead Poets Society." Most often, private schools aim to serve middle- and lower-income families, with modern but humble facilities. According to the Council for American Private Education, the average K-12 private school tuition hovers around $10,000 a year. Add multiple children and multiple years, and middle- and lower-income families quickly struggle to afford tuition.
A 529 expansion offers a new avenue for families to save and utilize pre-tax dollars to pay for their child's tuition. And, as it exists today, families could see matching funds on 529 plans from employers, states, and nonprofits — further enabling lower-income families to utilize these tax-free savings accounts.
The other unrecognized benefit of 529 expansion is breaking down the silos that exist within our nation's antiquated education system. Today, education policy is largely divided into two sectors: K-12 and post-secondary. This classical distinction ignores the realities of today's economy and has created a K-12 system that fails to adequately prepare college or career-ready students.
This was best illustrated last week when it was announced that the graduation rate reached 84 percent, but the latest Nation's Report Card tells us that only 37 percent of 12th graders are proficient in reading and only 25 percent are proficient in math. While those figures are a couple of years old, long-term trends for 17-year-old students, as measured by the National Assessment of Educational Progress, report stagnant results in math and reading. Furthermore, between 40 to 60 percent of first-year college students require remedial courses.
The disconnect between K-12 and post-secondary couldn’t be more obvious, and the tax bill's 529 expansion is a small but very important step toward tearing down the artificial wall between K-12 and post-secondary education. If parents begin to invest in their child's future during their K-12 years in order to ensure they receive an education that best meets their needs, that academic investment will pay off dividends as the child matriculates to college, technical school, and/or a career.
As Congress turns its attention toward taking final votes on the tax bill this week, they should speak to their constituents about these great reforms to 529 accounts. The 529 expansion is an important and critical step to supporting students, innovating education, and empowering parents with more power and autonomy over their child’s education.
Matt Frendewey is a partner with Decider Strategies and a former Special Assistant to the Secretary at the Department of Education.
If you would like to write an op-ed for the Washington Examiner, please read our guidelines on submissions here.