Menu
Tax Notes logo

College Savings Could Be Diverted to IRA Under Senate Bill

Posted on May 3, 2022

Parents saving for college would get new tax cuts and the option to jump-start their children’s retirement savings under bipartisan legislation introduced in the Senate.

The Helping Parents Save for College Act of 2022 (S. 4103) would expand the section 25B savers credit to cover education savings account contributions and would allow rollovers from education accounts to Roth IRAs. It was introduced April 28 by Senate Finance Committee members Maggie Hassan, D-N.H., and Susan M. Collins, R-Maine.

“The high cost of higher education is hurting families’ bottom lines and standing in the way of students’ success,” Hassan said in a May 2 release. “That’s why Senator Collins and I introduced bipartisan legislation that takes commonsense steps to make it easier for families to save for their child’s education, including by cutting taxes for families who put away money for college.”

Under the bill, lower- and middle-income college savers would receive a savers tax credit for 50 percent of contributions made to section 529 education savings accounts. The tax-favored accounts are eligible for use at vocational schools and two- and four-year colleges and universities.

“Education plays a vital role in opening the doors of opportunity to all Americans, but the rising cost of a college education threatens to close those doors to many families across the country,” Collins said in the release.

The bill would also allow college savers to roll over unused college savings into a Roth IRA retirement account for the child.

Collins said section 529 plans “are a great option for parents to save for college expenses, but uncertainty about whether their children will choose to pursue post-secondary education years in the future can be a deterrent to opening and investing in an account.”

The bill has already drawn support from the College Savings Foundation, College Savings Plans Network, National Association of State Treasurers, New Hampshire Higher Education Assistance Foundation, University of New Hampshire, Alfond Scholarship Foundation, and Finance Authority of Maine.

"We know . . . that families aren't always sure what the future will hold and sometimes hesitate to take that step to open an account and save because they might want or need some flexibility down the road,” Colleen Quint of the Alfond Scholarship Foundation said in the release. “This bill provides just that kind of reassurance that funds invested for their child’s future will, indeed, be available for their future even if all of the resources saved are not needed for education.”

Copy RID