Bill Overview
Title: Inflation-Adjusted Education Investment Act
Description: This bill modifies provisions relating to qualified tuition programs (i.e., tax-exempt 529 plans). Specifically, it increases from $10,000 to $12,000 the limitation under such programs on payments for educational expenses, including expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. The bill provides for an annual inflation adjustment to the increased limitation amount for taxable years beginning after 2022.
Sponsors: Sen. Kennedy, John [R-LA]
Target Audience
Population: People using 529 education savings plans
Estimated Size: 6000000
- Inflation-Adjusted Education Investment Act affects individuals using qualified tuition programs, also known as 529 plans, which are popular in the US for saving and paying for education expenses.
- 529 plans are used by parents, guardians, and students to save money for future education costs, signaling the primary group impacted includes households with children or future students.
- The increase in the payment limit from $10,000 to $12,000 allows those already using 529 plans to allocate more funds towards education expenses, directly benefiting families who can afford to contribute up to or beyond the initial $10,000 limit.
- The annual inflation adjustment benefits those who will continue using these plans in the future, ensuring that the saving limits remain relevant.
- As education financing is a significant concern in the US, American families with children are a key population group impacted by changes in legislation governing 529 plans.
Reasoning
- The Inflation-Adjusted Education Investment Act primarily affects families who have the financial capability to utilize 529 plans for educational expenses.
- Since the act increases the contribution limit slightly and adjusts it for inflation, it would more significantly impact families already contributing near the current $10,000 limit or those anticipating future educational expenses.
- It is less likely to affect families with lower income who may not be able to maximize 529 plan contributions.
- Considering the budget constraints, the act is not targeted towards creating new users of 529 plans but rather enhancing benefits for existing contributors or those positioned to contribute more.
- Families with children in various stages of education, especially those nearing college, could find this act more beneficial.
Simulated Interviews
Marketing Manager (California)
Age: 45 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 5/20
Statement of Opinion:
- This increase will help us save a bit more for college, especially since costs keep rising.
- I'm glad there will be an inflation adjustment because it feels like everything is getting more expensive.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Software Engineer (Texas)
Age: 37 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- An extra $2,000 could help cover more alternative school expenses I'm helping with for my niece and nephew.
- It's nice to see future costs considered with the inflation adjustment.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 8 |
| Year 20 | 7 | 7 |
School Teacher (Florida)
Age: 29 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- It's great that starting limits will keep up with inflation by the time I really need it.
- This makes me more confident in opening a 529 plan sooner.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Financial Advisor (New York)
Age: 50 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 20.0 years
Commonness: 2/20
Statement of Opinion:
- This policy allows me to keep up with rising costs for my son's tuition.
- The incentive to contribute more for K-12 can help manage private school fees too.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 8 | 7 |
Stay-at-home parent (Illinois)
Age: 40 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 7.0 years
Commonness: 7/20
Statement of Opinion:
- I can see the benefit but without more disposable income, the cap increase is not that helpful.
- Inflation adjustment is good for future planning, however.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 4 |
| Year 10 | 5 | 4 |
| Year 20 | 4 | 3 |
Retired (Ohio)
Age: 55 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 4/20
Statement of Opinion:
- I have been putting away money for grandchildren for a long time, so maximizing contributions is always a plus.
- This encourages keeping up the contributions even for their elementary education expenses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 5 |
Freelancer (Georgia)
Age: 28 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 10/20
Statement of Opinion:
- Having the ability to contribute more once I start makes the plan seem worthwhile.
- Inflation adjustment sounds beneficial long-term.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 6 | 5 |
Nonprofit Executive (Virginia)
Age: 48 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 3/20
Statement of Opinion:
- Allows me to put more towards saving for the remaining high school years if needed.
- I appreciate any policy influencing the affordability of education.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 8 |
| Year 10 | 8 | 7 |
| Year 20 | 7 | 6 |
Sales Representative (Pennsylvania)
Age: 32 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 6/20
Statement of Opinion:
- Increasing contributions now helps cover early education plans.
- Using 529 for elementary education might be valuable.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 6 |
| Year 20 | 8 | 5 |
Entrepreneur (Michigan)
Age: 42 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 8.0 years
Commonness: 4/20
Statement of Opinion:
- The increased contribution limit is appealing for putting money aside as my business grows.
- It's comforting knowing future contributions adjust to inflation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
Cost Estimates
Year 1: $500000000 (Low: $400000000, High: $600000000)
Year 2: $520000000 (Low: $410000000, High: $610000000)
Year 3: $540000000 (Low: $420000000, High: $620000000)
Year 5: $580000000 (Low: $440000000, High: $660000000)
Year 10: $650000000 (Low: $480000000, High: $730000000)
Year 100: $900000000 (Low: $600000000, High: $1000000000)
Key Considerations
- The policy encourages greater educational savings, which is a long-term benefit for society.
- It reduces taxable income for households who can afford to contribute more to education savings accounts, potentially skewing benefits towards higher income earners.
- The policy does not directly address educational costs but improves savings mechanisms.