Proposal would help families save for their children’s futures
BOSTON, MA – The Association of Colleges and Universities in Massachusetts (AICUM) today applauded the state’s Joint Committee on Revenue, for advancing a college savings tax incentive proposal out of committee with a favorable recommendation.
The amended proposal, An Act building real incentives for college savings, originally filed by Senator Eileen Donoghue, would allow families to deduct a limited amount of qualified college savings contributions from their state taxes annually. Qualified contributions to a Massachusetts-managed prepaid tuition program (UPlan) or college savings program (529) of up to $1,000 for single filers and $2,000 for joint filers would be eligible for a state tax deduction.
Such incentivized college savings programs, often called 529s, are available in the vast majority of income-tax levying states, where they provide a needed boost to middle class families wishing to save for their children’s futures. A recent study demonstrates that of the households participating in the federal 529 program, 72 percent make less than $150,000 a year.
“There’s a lot to be done to help young people get to and through college affordably,” said Richard Doherty, president of AICUM. “College savings programs have proven to be an essential piece of the college affordability puzzle, and it’s time that Massachusetts catches up with the rest of the country in trying to help families save for their children’s futures. We strongly urge the legislature to move forward with this common-sense college savings incentive, which has helped low and middle income families across the country pay for college.”
Massachusetts is an outlier nationally and regionally in its lack of tax-based college savings incentives. Of the 42 states levying income taxes, and the District of Columbia, Massachusetts is one of only eight that fail to offer college savings incentives. All of the Commonwealth’s neighboring states offer such college savings incentives, save for New Hampshire, which does not have an income tax.
In 2006, Vermont introduced a $2,500 tax incentive and immediately saw a 34 percent increase in the number of families creating college savings accounts.
The Massachusetts Educational Financing Authority (MEFA) illustrates well just how much college savings pay off in the long run. According to an example provided by MEFA, $6,906 in college savings accumulated over 10 years could reach $10,000 with interest and earnings; whereas taking out a $10,000 student loan and adding interest payments could leave the student with a debt of $13,920. Over time, that $6,906 set aside for college saves that student more than $7,000.
“Providing needed assistance with college savings not only helps families looking to save for their children’s futures, but these programs benefit our economy as a whole,” said Doherty. “The more students save for college, the more they can contribute to our economy after they graduate. We all win when low and middle income families are given additional tools to help save for college.”
The Association of Independent Colleges and Universities in Massachusetts (AICUM) was founded by independent college presidents and today comprises 58 degree-granting, accredited independent colleges and universities in the Commonwealth. It is the leading voice on public policy matters affecting independent colleges and universities in Massachusetts. AICUM plays a critical role in advocating for state and federal funding for need-based student financial aid, research and addressing state and Federal legislative and regulatory issues.
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