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President Obama said Friday that the popularity of 529 college savings accounts made him abandon a proposal to end the tax benefits of those accounts just days after first proposing it. "It wasn’t worth it for us to eliminate it," he said during remarks at Ivy Tech Community College in Indiana. "The savings weren’t that great.”
Families using 529 plans "were a little more on the high end" of the income scale, Obama said, noting that he has such accounts for his two daughters. "Our thinking was you could save money by eliminating the 529 and shifting it into some other loan programs that would be more broadly based," he said.
Although his plan would not have retroactively cut the tax benefits for savings that were already in a 529 account, Obama said that enough people liked the program -- or liked the idea of using the program in the future -- for him to change his mind. The plan, which would have raised about $1 billion in revenue over 10 years, also came under attack from both Congressional Republicans and Democrats, including House Democratic Leader Nancy Pelosi.
A Government Accountability Office study in 2012 found that just 3 percent of families were using 529 savings plans, and roughly half of them earned more than $150,000 a year.
