U.S. Congressmen Reid Ribble (R-WI) and Matt Cartwright (D-PA) introduced the bipartisan Children’s Savings Accounts Offer Parents Plenty of Reasons to Understand aNd Invest in Tuition Yearly (CSA OPPORTUNITY) Act with the support of six House colleagues.
One well known type of Children’s Savings Account (CSA) is the 529 plan. Created in 1996, 529 Plans allow parents to save money for college while offering both federal and state tax benefits. Unfortunately, money set aside in a 529 Plan counts against the asset limitations set forth in Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), and Low Income High Energy Assistance Program (LIHEAP).
This in turn forces families to choose between putting aside money for college and keeping essential assistance.
“When government makes it difficult for families to save money, they tend not to save money, and the cycle of poverty continues. This legislation would help remove barriers that prevent parents from providing opportunities for their children’s future. We need to help break the cycle of poverty that passes from one generation to the next and by removing this arbitrary cap on savings we can help in that transition. Every parent wants to provide a better future for their children, government policy shouldn’t work against that,” Congressman Ribble stated.
“College savings accounts alter the aspirations of children by sending a message that they should expect more from their own futures. Yet, when we force parents to choose between saving for college and keeping the lights on, we essentially punish financial responsibly,” Rep. Cartwright said. “We should end this difficult decision for families and provide the opportunity for all families to save for their children’s education.”
Andrea Levere, President of the Corporation for Enterprise Development (CFED), endorsed the legislation. “Parents shouldn’t have to choose between affording basic necessities and saving for their children’s education. Rep. Cartwright and Rep. Ribble have demonstrated exemplary leadership in coming together to introduce a bipartisan bill that will expand opportunity for families throughout the country.”
The CSA OPPORTUNITY Act would exempt 529 Plans from TANF, SSI, and LIHEAP asset limitations. The bill would also exempt non-529 CSAs from TANF, SSI, LIHEAP, and Supplemental Nutritional Assistance Program (SNAP) asset limitations.
Over 1.3 million American children born each year – and more than half of minority children – are born into families with negligible savings to invest in their futures. Yet research and practice have shown that even a small amount of savings increases the likelihood that a child will attend college. One study showed that children from low or moderate income families who saved between $1 and $500 were three times more likely to attend college and four times more likely to graduate than those without savings.