Gov. Paterson Signs Bill To Make Saving For College Easier For New York Families
Governor David A. Paterson has signed a bill into law that eases restrictions to the New York College Choice Tuition Savings Program, allowingrelatives, employers and others to contribute to State-sponsored college savings accounts.
The New York State College Choice Tuition Savings Program provides a flexible and low-cost way to save for college. The contributions to the Program’s accounts (called 529s) are tax-deductible for New York State residents, and withdrawals for qualified higher education expenses are tax-free. When created, the plan only allowed the person who opened the account – typically parents – to contribute. This bill allows anyone to make a contribution.
The Program, started in 1998, now has nearly 600,000 accounts and has helped New Yorkers save $8.3 billion for college expenses. In the past five years, more than 20,000 checks, valued at over $57 million, were rejected from these college savings accounts because they were submitted by someone other than the account owner.
"Planning for financing a college education is one of the biggest responsibilities parents face today. We have seen skyrocketing increases in tuition, and often our children are shouldering this burden with loans that remain until our children have children," said Governor Paterson. "If a child's relative, a parent's generous employer or a scholarship fund chooses to invest money in an existing 529 account, the state should not discourage the investment choice."
The Office of the State Comptroller, which oversees the Program, has noted frequent complaints about third-party prohibitions related to 529 accounts. If a parent opened a 529 account for a child, that child’s grandparents, aunts, uncles and other relatives couldn't contribute funds to the account, and have had to open their own 529 accounts instead. This bill changes that, and brings New York in line with more than 30 other states.
New York State Comptroller Thomas P. DiNapoli said: "This is great news for New York families. The easier it is to contribute to a 529 account, the greater the likelihood that family members will actually make these helpful contributions. As college costs continue to rise, we need to do everything we can to make higher education attainable for all New Yorkers. Governor Paterson’s action today affirms his commitment to increasing educational opportunities for our children."
Individuals who open accounts can receive a tax deduction of up to $5,000 per year for contributions. The new law will continue to offer the tax deduction only to account holders while accepting donations from third parties. Withdrawals for qualified college expenses remain tax-exempt.
State Senator Hugh T. Farley, Chairman of the State Senate Committee on Banks, sponsored the bill in the Senate and said: "It is more important than ever for people to pursue higher education in order to compete in the job market and in our global economy. Many families and college students, particularly middle-class families, find it a tremendous financial challenge when it comes to paying ever-increasing college costs. Tools like the New York College Choice Tuition Savings Program can provide a way to help families be prepared for the cost of college. By making it easier for more people to contribute to a student’s savings plan, New York is helping to make the dream of higher education and brighter futures for our young people a reality."
Assemblyman Darryl C. Towns,
Chairman of the State Assembly Committee on Banks, sponsored the legislation in the Assembly and said: "Every child deserves the opportunity to access the incredible potential that higher education brings. New York, like the rest of the nation has experienced a shift in the family structure. According to AARP, in New York, more than 290,000 children live in grandparent-headed households, while another 111,806 children live in households headed by other relatives. This legislation gives New York a tremendous opportunity to allow the village to come together and help support our children in their pursuit of a higher education."
Richard Stopol, President of New York City Outward Bound, said: "All of us at New York City Outward Bound are thrilled by the passage of this bill. It will enable one of our network schools, the Washington Heights Expeditionary Learning School, to put in place an innovative Work Study/College Preparation program that we hope will eventually become a model for other schools. As part of this program, students will spend a day a week in paid internships and the money earned through those internships will be deposited into College Savings Accounts that will be set up for each student. This will help make college more accessible and affordable for the students, almost of all whom will be first-generation college students."