8NEWS, TYLER ENGLANDER
A bipartisan effort is underway to diversify the way Americans can use college savings accounts.
The push is being led by Representatives Abigail Spanberger (D-07) and Rob Wittman (R-01), their bill, the Freedom to Invest in Tomorrow’s Workforce Act, would allow 529 college savings accounts to be used for career readiness credentials and certificates.
“It would ensure those who have 529 accounts for tuition, books, testing, costs related to training programs,” Rep. Spanberger said.
According to Virginia529, about 2.5 million people in the commonwealth use 529 accounts. Right now, they can only be used at K-12 schools, higher education institutions and approved vocational schools.
Similar to a 401(k), a 529 plan allows people to put money into an investment fund then withdraw it tax-free to pay for educational expenses. Spanberger says the bill targets in-demand careers that may not require a degree.
“Certified nursing assistants, those in the I.T. sector,” Spanberger said. “Folks in the skills trades. Welding as an example. Pharmacy technicians, people specializing in medical coding and billing specialists.”
If those savings aren’t used for educational purposes, a 10% tax is applied if the money is withdrawn from the accounts. Spanberger says this gives parents flexibility.
“We thought you might want to go to a four-year institution, but if you want to pursue a career in this field, now we can use these savings for the credentialing programs that a student needs,” Spanberger said.
Meanwhile, several organizations have expressed support for the legislation including the American Trucking Association, arguing it could help alleviate the effects of a labor shortage.
“Mid-career career changes might have the flexibility of using these savings to be able to get that credential that is necessary to help them take that next step in their career or in some cases make a wholesale change,” Spanberger told 8News.
The bill has the support of over 30 members of Congress, both Republicans and Democrats, but has not yet received a vote in the House Ways and Means Committee.