LINCOLN (AP) — Lawmakers will consider a bill next year designed to help low-income families participate in Nebraska's state-sponsored college savings plan.
Sen. Rick Kolowski of Omaha said Tuesday that he will introduce the measure, which would remove a barrier for low-income families.
“If students save for college, no matter how small that amount is, they're more likely to go to college,” Kolowski, a retired high school principal, said Tuesday at a legislative hearing. “The earlier they start to save, the earlier they get on that track.”
The measure would exclude the college savings plan, scholarships and work-study income from the formula that determines whether a person qualifies for public benefits. The formula disqualifies applicants who have too many assets or too much income.
The Nebraska Retirement Systems Committee convened the hearing as part of a legislative study of the state plan. Kolowski said his measure would also exclude Aid to Dependent Children, child care subsidies and a home energy program for low-income residents.
Nearly half the families participating in Nebraska's state-sponsored college savings plan make at least $100,000 per year, according to the State Department of Revenue. Families with an adjusted gross income of more than $100,000 accounted for nearly 45 percent of the plan's participants. Families who made less than $50,000 per year accounted for less than 7 percent.
Nebraska's “529 plan,” named for a provision of the federal tax code, allows families to save for education expenses in a tax-advantaged investment account.
More than 12 percent of minors in Nebraska are enrolled in a savings plan, said State Treasurer Don Stenberg. He said his office has already worked to promote the savings plan statewide. The Treasurer's Office uses drawings and a series of scholarships to promote the plan, he said.
Reaching out to low-income families “is part of the challenge,” Stenberg said. “It's important to note, though, that not every low-income family will stay a low-income family throughout their lifetime. A lot of folks are getting out of college. I think you have to take into account that some of the folks who may not be able to put money into a savings account now may be able to five years from now.”
The plan charges a 0.30 percent fee on investments — a 0.27 percent management fee for First National Bank, which manages the plan, and 0.03 percent that goes to the state for staff and operating expenses.
Nationally, the cost of higher education has increased faster than incomes have, said Aubrey Mancuso, a policy coordinator of the advocacy group Voices for Children. The average cost of tuition and fees at a public, four-year institution in Nebraska has increased by 16 percent over the past five years, while median income increased by 2.2 percent without accounting for inflation.
Mancuso said saving early in a child's life has been shown to increase the odds that the child will want to go to college.
“It's harder for people to get through the door, and those who are getting through the door are increasingly paying for it with loans,” Mancuso said.
“One thing that's become clear on this is that interventions at the high school level are starting too late.”
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