A bill introduced in the House of Representatives could have widespread benefits to parents saving for a child’s education.
The Helping Families Save for Education Act, introduced by Representatives Tim Walberg (R–MI) and Dan Kildee (D–MI) would expand the usefulness of Coverdell Education Savings Accounts (ESAs).
Coverdell ESAs enable users to invest up to $2,000 per child per year for their children’s education. Users can choose between a wide variety of investment options, including certificates of deposit, stocks, bonds, and mutual funds. Investment earnings are tax-free and can be used for public or private school K–12 expenses such as tuition, books, computers, tutoring, or online learning. They can also be used for college.
The proposal sponsored by Kildee and Walberg would increase the annual dollar limitation on contributions from $2,000 to $10,000 and allow contributions to the accounts until the beneficiary is 22 years old, instead of the current age limit of 18.
The proposal—which aims to helps families cover the cost of education—would put into effect a policy that Heritage Foundation analysts highlighted in 2012:
Congress can reform the existing Coverdell program to empower families with increased access to school choice. The existing $2,000 annual cap on Coverdell contributions prevents the accounts from being as beneficial as they could be to help families afford a variety of education options outside the traditional public-school realm. Lifting the cap on Coverdell contributions would provide greater support for school choice.
Expanding school choice options and incentivizing parental investment in education is good policy and would improve access to quality educational options.