Drake Introduces Legislation To Help American Families Save For Their Child's Education

Press Release

Drake Introduces Legislation To Help American Families Save For Their Child's Education

U.S. Representative Thelma Drake (R-Va.) yesterday introduced H.R. 2588, a piece of commonsense legislation that updates an existing financial planning tool aimed at helping Americans save for the increasing cost of higher education.

Created in 1998, Coverdell Education Savings Accounts (ESAs) allowed parents to begin saving for college by putting $500 annually in a tax-deferred savings account. In 2001, Congress increased the contribution limit to $2000, but included a sunset provision that will cause the limit to revert to $500 in 2011. Unfortunately, while the contribution level has remained unchanged, tuition at America's colleges and universities has increased at a rate twice that of inflation. Rep. Drake's legislation will raise the contribution limit to meet current needs and ensure going forward that it keeps pace with the rising costs associated with higher education.

"It is impossible for any American family to look at college as an option without first considering how they are going to pay for it," said Rep. Drake. "Coverdell savings accounts provide families with a fantastic resource but these accounts are at risk of becoming obsolete by failing to keep pace with the rising cost of higher education.

"By keeping these accounts mired at 2001 levels, we are robbing many families of a helpful way to save for their child's education. We know better than to send a child to school with only a quarter for lunch money. We should know better than to unnecessarily cap the amount we invest in our children's future," Drake continued.

The Comprehensive Coverdell Modernization Act will do the following to improve this important education resource:

 Meets the reality of current tuition costs by doubling the annual after-tax contribution limit to $4,000.

 Indexes the contribution limit to inflation annually.

 Removes the existing 2011 sunset provision for contribution limits, which will revert contribution limits to just $500 in 2011, adversely affecting a family's long-term financial planning for higher education expenses.

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