GOP plan expands college savings plans to cover K-12

Sally Ho
Associated Press

A late amendment to the Republicans’ tax overhaul plan would allow parents to put money they save for their children’s college costs toward K-12 education, including private school tuition and homeschool expenses, in a proposal hailed as a win by school choice supporters.

The Senate plan would expand 529 education savings accounts that have been restricted to college tuition and expenses.

“Expanding 529’s to include any educational option is a common-sense reform that reflects the reality that we must begin to view education as an investment in individual students, not systems,” Education Secretary Betsy DeVos said.

Colleges and universities must be accredited or recognized by the U.S. Department of Education for the expenses to be eligible for 529 money, but it’s unclear how that type of requirement would apply to K-12 expenses at private schools or homeschooling, if at all.

The measure was part of the Republicans’ sweeping $1.5 trillion revamp of the nation’s tax code s approved early Saturday. The House earlier this year approved a similar 529 expansion effort in its version of the tax overhaul, which still needs to be reconciled with the Senate plan. The House version did not include homeschooling expenses.

Sen. Ted Cruz, a Texas Republican, said the structure of the savings accounts would not change and he expects that states will have the discretion over what qualifies under the K-12 expansion.

Cruz had proposed the amendment that would cover things like tuition, books, online school materials, tutoring and therapy for students with disabilities, from public, private and home schools.

If signed into law, it would mark an expansion of the 20-year-old 529 savings program, which generally works by allowing families to set up savings accounts to contribute and pool large amounts of money for future schooling expenses with some tax savings on the returns on the investments.

Some school choice supporters have been critical of 529 expansion ideas because they would only help high-income families that can afford to put money in the savings programs. The cap for how much money can be contributed varies by state, but it can be as much as $500,000 total for each account, according to the College Savings Plans Network.

“This provision will help a relative handful of affluent families who are already choosing private schools. It seems unlikely to expand school choice options for families in the middle or working classes,” said Mike Petrilli, president of the conservative Thomas B. Fordham Institute.

Cruz said his plan allows for more people to tap into the 529 program because it now covers a far larger base of expenses and schooling years. But critics say it remains to be seen just how the K-12 expenses will be subjected to regulatory scrutiny.

“This is all really murky. The problem with passing a bill that you pass in the dead of night is figuring out what all the conditions are,” said Kim Rueben, a senior fellow at the nonpartisan Tax Policy Center.