529s and Public Assistance: Asset Limits as a Barrier to College Savings

Rourke O'Brien

529s are tax-advantaged accounts designed to help families save for post-secondary education. In recent years, state policymakers and 529 administrators have worked to expand access to 529 plans and increase the participation of lower-income families through outreach, advertising, and targeted incentives such as matching deposits and reducing or eliminating fees. Yet, as plan administrators and state and federal policymakers design new strategies for expanding the use of 529 plans to lower income families, they must also ensure that saving in 529s won't jeopardize a family's eligibility for vital public assistance such as TANF cash assistance or Medicaid. Families who proactively save for a child's or parent's post-secondary education should not be penalized with a reduction or loss of vital public benefits.

Below is a brief description of how "asset limits" govern eligibility for major public assistance programs as well as a detailed look at the specific treatment of 529 plans and opportunities for reform at the state and federal level.