Congress makes the federal tax benefits on 529 college savings plans permanent

Landmark Bill that Guarantees College Savings for Class of 2011 and Beyond Expected to be signed into Law

WASHINGTON, DC, August 4 , 2006 – College Savings Foundation (CSF), the leading not-for-profit enabling American families to achieve their education savings goals, applauded Congress today for passing legislation that makes permanent the Federal tax benefits on 529 college savings programs. Permanence for 529 plan benefits is included in the Pension Protection Act, H.R. 4, which was passed by the House on July 28 and the Senate on August 3 and is expected to be signed by the President. The now defunct expiration date of December 31, 2010 would have terminated Federal tax breaks on 529 savings plan for next year’s high school graduating class.

“Congress cleared the cloud of uncertainty over Americans who worry if they will be able to save enough for their children’s college education,” said David Pearlman, Chairman of CSF. “The perseverance and vision of Senate co-sponsors Charles E. Grassley (R-IA) and Max Baucus (D-MT), and House co-sponsors Melissa A. Hart (R-PA) and Earl Pomeroy (D-ND), in advancing this legislation have protected our children’s Federal college savings benefits and helped to preserve the promise of the American Dream.”

“The collaboration of state government officials and the private sector to advance this legislation demonstrates that we remain committed to encouraging saving for education,” said Kevin McMullen, Chairman of the CSF Government Affairs Committee. “Our partnership with the College Savings Plans Network, which is the organization of state officials, has been instrumental in helping facilitate discussion and ignite action.” Under the 529 college savings plan structure, so-called for the section of the United States Internal Revenue Code that bestows Federal income tax-free treatment, investors make after-tax contributions to state-sponsored programs with the expectation of seeing them grow tax-deferred and withdrawing them federal income tax-free when they are used for qualified higher education expenses. Qualified higher education expenses include tuition, fees, books, supplies and equipment required for attendance at an accredited institution of higher education. They also include room and board expenses for students attending at least half-time. The average annual total cost of attending a 4-year public and a 4-year private college or university in 2005-2006 has increased 6.6% (to $12,127) and 5.7% (to $29,026), respectively according to The College Board. Assuming such costs increase by 5% a year, the projected cost of college in 15 years will be more than $100,000 for a 4-year public college and more than $200,000 for a 4-year private college.

“Individuals and families need financial rewards to cope with the sobering rise in higher education costs that will provide the necessary incentive for people to keep investing in the future of their children, and ultimately, America,” said Pearlman.

About The College Saving Foundation (CSF) The College Savings Foundation (CSF) is a Washington, D.C.-based not-for-profit organization with the mission of helping American families achieve their education savings goals, by working with public policy makers, media representatives and financial services industry executives in support of education savings programs. For more information on CSF and its mission, please access www.collegesavingsfoundation.org