Focus should be on saving more for college

Making college more affordable — chiefly by reducing student loan burdens — is a hot topic on the presidential campaign trail.

But promoting policies that would create stronger incentives to save money for college? There hasn’t been as much talk on that subject.

The College Savings Foundation, a nonprofit organization that supports higher education savings programs like the 529 accounts, wants to alter the national conversation. Its focus is on helping families sock away money for college.

The Arlington, Va.-based group recently released a poll as part of its annual “State of College Savings” survey. The organization asked more than 800 parents what they would like to see the new president and Congress do to enhance 529 college savings accounts.

Parents’ top priority: Continuing to allow contributions to 529 accounts, regardless of household income.

The accounts have come under criticism in recent years for supposedly being a benefit largely for wealthy families. As a result, there have been calls in Congress for placing income caps on 529 eligibility.

The numbers paint a somewhat different story.

According to a 2014 survey from Strategic Insight, about 10 percent of 529 accounts are owned by households with income below $50,000, and more than 70 percent are owned by households with income below $150,000 (which by today’s standards is not exactly upper class). Only about 5 percent of the accounts involve families with incomes of $250,000 or more, the survey said.

To attract more lower-income account holders, many states have been offering promotional programs and incentives, such as matching funds, with some success.

The College Savings survey found that parents want employers to help employees save through 529 programs. This would involve granting tax credits or other incentives to employers, similar to what’s happened with 401(k) retirement accounts.

In addition, the poll found that parents want to be allowed to transfer unused funds in the college accounts into their retirement accounts or their college students’ retirement accounts.

The fourth and final recommendation from parents is a policy change to allow 529 contributions to be eligible for savings credits — a move that could largely encourage lower-income families to open college savings accounts.

Mary Morris, the College Savings Foundation’s chairwoman and the head of Virginia’s college savings program, likes the policy priorities recommended by parents in the poll.

“There has been a lot of attention on how to deal with student loan debt,” Morris said. “We’d like (lawmakers) to look at how to make college affordable by focusing on savings incentives.”

The foundation and other groups have been promoting these savings enhancements for several years, and Morris said there are at least four bills pending in Congress that address aspects of these initiatives.

The parent survey didn’t address one pressing issue, Morris said. That’s the idea of allowing 529 distributions to be used to pay down student loan debt under certain circumstances and without penalties.

Whether a new administration in the White House and new voices in Congress can give 529 programs a favorable push forward remains to be seen.

But, as Morris sees it, even a nudge can go a long ways toward promoting saving for college.

‘There has been a lot of attention on how to deal with student loan debt.’