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Obama's Plan to Help Students Pay for College

Washington Post

President Obama this week touted new ways to help students pay for college, but he also proposed stripping away a popular benefit: a significant tax advantage of college savings plans used by millions of American families.

The benefit allows families to withdraw money tax-free from savings plans that have become a primary way for parents to save to send their children to college. The plans, known as 529 plans, are considered a critical tool for Americans as the cost of tuition continues to rise and outstanding student debt stands at more than $1 trillion. [...]

Affluent families have disproportionately benefited from the changes in the law. A report from the Government Accountability Office found that nearly half of families with 529 plans made more than $150,000 a year and had median assets of $413,000 — 25 times higher than the assets for families without the plans.

“It’s kind of just a cash giveaway to upper-income folks,” said Mark Huelsman, a senior policy analyst at liberal think tank Demos. “The president, both from a policy and a political perspective, sees something like that and says why don’t we use some of that to pay for the cost of college up front, in this case community colleges.”