Virginia Lawmakers Push Bipartisan Bill to Expand Use of 529 Savings Plans

Photo by Josh Appel on Unsplash

By Meghin Moore

July 11, 2023

Under Virginia’s 529 savings plan, families who’ve built up accounts for years to help with college savings have found out they can’t be used for technical training or other atypical four-year programs. Now, Virginia lawmakers want to help change that.

Two of Virginia’s members of Congress have launched a bipartisan effort to overhaul the tax code to allow college savings plans to be used for workforce training and accreditation programs, instead of just traditional four-year programs.

Democratic Rep. Abigail Spanberger and Republican Rep. Rob Wittman are hoping to get members of Congress to change the Internal Revenue Code to reform 529 savings accounts in recognition of the changing landscape of higher education.

Their bill, the Freedom To Invest in Tomorrow’s Workforce Act, recognizes that many Virginians enter alternative pathways for jobs that are in high-demand or pay well, such as those in the skilled trades and nursing.

The 529 savings plan program helps families save for college tuition and related costs and has had its terms broadened over the years to include alternative pathways in higher ed, including outside training and certification for students in K-12 schools, and for people with disabilities.

Under the current program, students can use 529 funds for registered apprenticeships, but not training or credentialing that are offered at private institutions, leading to a gap in coverage.

If families want to withdraw the money from the plans to use for noneligible programs, they face high costs: paying tax on the income, as well as a 10% penalty on part of the funds.

Through the reintroduction of the bill, Spanberger and Wittman want students and their families to be allowed to use the educational savings plan for programs that aren’t currently eligible because they aren’t qualified for financial aid under legislation known as the Higher Education Act, which was originally adopted in 1965.

“Students should be able to use their 529 savings accounts to cover tuition, books, certification, and testing costs related to workforce training programs,” Spanberger said in a press release. “A four-year college is not always the right option for every Virginia student.”

This is the third time the lawmakers have introduced the legislation, having done so earlier in 2019 and in 2021. Spanberger and Wittman are both hopeful that it will get heard in the House Committee on Ways and Means, and reach the House floor in the fall.

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