The Treasury Department has proposed several improvements in Section 529 college savings plans, including the use of age-based index funds and the elimination of home-state biases.
In a report prepared for the White House Task Force on Middle-Class Working Families, the Treasury Department recommends greater availability of age-based index funds, which automatically shed equities and add fixed-income assets as the beneficiary approaches college.
The report was introduced at a meeting of the White House task force, chaired by Vice President Joe Biden, at Syracuse University in New York, to discuss ways to help families save and pay for college.
I know how challenging it is for parents and students who are trying to save or pay for college, said Biden in a statement. We should be making this process easier, not more difficult, and were starting by tearing down barriers so that middle-class families have the means to send their kids to college.
The Treasury report recommends eliminating a home-state bias in the assessment of fees and state taxes that force many families to choose the funds offered in their home state instead of funds available in other states. The report also recommends putting limits on 529 plan account balances on a per-beneficiary basis, rather than on a state-by-state basis, to help spread education aid to more low- and middle-income families.
The Treasury aims to improve transparency by collecting data via a survey questionnaire on 529 plan participation and investments, and making historical investment return information available directly from the College Savings Plan Networks Web site.
In addition, the Treasury report recommends that Congress and the states work together to strengthen compliance and monitoring of Section 529 accounts and their disbursements.
Biden was joined at the meeting by Treasury Secretary Timothy Geithner, Secretary of Education Arne Duncan, Syracuse University Chancellor Nancy Cantor, State University of New York Chancellor Nancy Zimpher and other higher-education experts. They also discussed the administrations proposal for simplifying the standard financial aid application, the Free Application for Federal Student Aid, or FAFSA, whose complexity often presents an obstacle to college affordability. By asking 153 questions, many of which have little or no impact on student aid eligibility, FAFSA imposes an unnecessary ordeal on 16 million students and parents every year. More than a million students who are eligible for student aid fail to fill out the form.
The Obama administration is currently seeking legislation to remove 29 of the most difficult questions from the form, streamlining the form by tailoring it to individual students, and allowing many students to electronically retrieve their tax information from the IRS and enter it into the online FAFSA.
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