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Obama abandons proposal to end 529 plans

By Candace Kellner
Staff Writer

The White House decided to back down from Congress afer an ongoing fight over the Obama administration’s proposal to end 529 college savings plans.

On Tuesday, Jan. 29, a White House official told CNN that the provision created unnecessary turmoil within Congress.

“Given it has become such a distraction, we’re not going to ask Congress to pass the 529 provision so that they can instead focus on delivering a larger package of education tax relief,” the official told CNN.

The controversial college savings plan, also known as “qualified tuition programs,” consists of 529 plans that grants holders the ability to save money and withdraw it tax free, provided that the money be used towards approved college expenses. These expenses usually include tuition, fees, room, board and other essential school-related supplies. Another state-provided savings plan allows holders to prepay for future tuition and to freeze current rates.

The White House’s increasingly unpopular proposal indicated that the administration did not foresee the popularity of the college savings plan and the opposition it would face against any proposal to end the program. Republicans speculate that the Obama administration’s reversal contradicted the President’s recent State of the Union address that emphasized “middle-class economics.”

“It’s another example of his outdated, top-down approach when our focus ought to be on providing opportunity for all Americans,” House Speaker John Boehner said on Tuesday, Jan. 27, according to CNN.

Susan Collins, a moderate Republican and Senator of Maine, said the plan never made sense.

“It would have led to more student loan debt and undermined the very values that we should be promoting,” Collins said in a statement.

In his recent State of the Union address, Obama did not mention the proposal. He broadly addressed the education plans, saying, “We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together.”

A White House official told CNN that the administration can still easily fund its education proposal, even without the 529 provision, based on savings generated by closing the “trust fund loophole” for the wealthier Americans.

A White House official also told CNN that, despite their reversal, the administration remains loyal to the other components of their education tax reform plan.

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