Overview
Title
To amend the Internal Revenue Code of 1986 to permit kindergarten through grade 12 educational expenses to be paid from a 529 account.
ELI5 AI
S. 152 wants to let people use special savings accounts, called 529 accounts, to pay for more than just college stuff, like books and classes for kids in kindergarten to 12th grade. This means they could use these savings to help pay for school supplies and even learning at home!
Summary AI
S. 152, known as the "Student Empowerment Act," aims to amend the Internal Revenue Code of 1986 to allow kindergarten through grade 12 educational expenses to be paid from a 529 account. The bill permits the use of 529 accounts for various educational expenses related to elementary and secondary education, including tuition, books, online materials, tutoring, test fees, and educational therapies, even for homeschooled students. It specifies that certain conditions must be met for tutoring or educational classes, like the tutor being a licensed professional or subject matter expert. This amendment would apply to distributions made after the bill becomes law.
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AnalysisAI
The proposed legislation titled the "Student Empowerment Act" aims to broaden the use of 529 savings accounts, which have historically been reserved for higher education expenses. Introduced by Senator Cruz and other co-sponsors, the bill seeks to amend the Internal Revenue Code of 1986 to allow funds from 529 accounts to cover educational expenses from kindergarten through grade 12 across public, private, religious, and homeschool settings.
General Summary
The Student Empowerment Act builds upon existing 529 college savings plans to include a wider array of educational expenses. Under this bill, the list of qualified expenses extends to tuition, curricular materials, books, online educational content, tutoring services, standardized test fees, dual enrollment in higher education institutions, and educational therapies for students with disabilities. These provisions aim to provide families with more flexibility in financing their children's education at the elementary and secondary levels.
Significant Issues
The expansion of 529 account use raises several significant concerns. Primarily, the amendment diverts from the original purpose of 529 plans, which were intended strictly to support higher education savings. This change risks depleting funds earmarked for college by using them for earlier educational expenses, which could reduce overall savings for higher education.
There are also potential issues related to misuse or abuse of funds, particularly in homeschooling contexts. The bill's language is vague about what constitutes legitimate educational materials, making it difficult to ensure the educational relevance of the purchases.
Furthermore, the inclusion of tutoring services as a qualified expense lacks specificity regarding tutor qualifications and standards, leaving room for inconsistent application across different states.
Another concern is the inclusion of therapy expenses for students with disabilities. While supportive in nature, using 529 accounts for such expenses might raise questions about the appropriateness of using education savings for what could be considered medical costs.
Additionally, there is the potential for overlapping benefits with the provision allowing dual enrollment expenses. This could result in unintended double benefits when combined with existing support for higher education costs.
Impact on the Public and Stakeholders
Broadening the scope of 529 accounts could offer immediate financial relief to families facing mounting educational expenses at the elementary and secondary levels. This could be particularly beneficial for families with children in private or religious schools, or those requiring specialized educational support.
However, the long-term impact might challenge the original intent of 529 plans. Reduced funds for higher education could adversely affect those who plan for significant college expenses, potentially increasing reliance on student loans.
Stakeholders such as homeschooling families might view the flexibility positively, yet the lack of clear guidelines could result in inconsistent monitoring, possibly leading to misuse or allegations of abuse of funds.
Overall, the legislation invites a delicate balance between immediate educational needs and future higher education planning, requiring careful consideration by families and policymakers to ensure its intended benefits are realized without unintended consequences.
Issues
The amendment to allow 529 account funds to be used for kindergarten through grade 12 expenses, including homeschool expenses, significantly broadens the original intent of 529 plans, which were intended for higher education savings. This change could lead to increased withdrawals for non-college expenses, potentially reducing funds available for higher education, as outlined in Section 2(a)(7).
There are concerns about the potential misuse or abuse of funds related to the provision allowing for the purchase of educational materials, particularly in a homeschool setting. The language lacks specificity, making it challenging to monitor and verify the educational relevance of materials purchased under subparagraphs (B), (C), and (D) of Section 2(a)(7).
The inclusion of tutoring and educational class fees as qualified expenses under Section 2(a)(7)(E) is vague in terms of qualifications and standards for tutors. This could lead to inconsistent interpretations and implementations across different states due to the lack of specific credentialing standards.
Including therapy expenses for students with disabilities as part of 529 plans raises ethical and financial issues about whether such medical-related expenses should be funded through tax-advantaged educational savings, as mentioned in Section 2(a)(7)(H).
The provision to use 529 funds for dual enrollment fees at institutions of higher education under Section 2(a)(7)(G) could overlap with existing benefits for higher education funding, raising concerns about potential double benefits.
The language in Section 2 is complex and could benefit from simplification to ensure better public understanding and proper implementation, especially regarding qualifications for tutors and educational therapies, which may be interpreted differently across states.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the act states that the official name of this legislation is the “Student Empowerment Act.”
2. 529 account funding for homeschool and additional elementary and secondary expenses Read Opens in new tab
Summary AI
The amendment to Section 529 of the Internal Revenue Code allows funds to be used for various educational expenses related to elementary and secondary school. These expenses include tuition, curriculum materials, books, online materials, tutoring, standardized test fees, dual enrollment fees, and educational therapies, and it also applies to homeschooling expenses.