New Republican Targeted Relief Package Includes 529 Plan Proposal

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By Mark Kantrowitz

September 9, 2020

Republican members of Congress introduced a new COVID-19 financial relief package in the U.S. Senate on September 8, 2020.

The Delivering Immediate Relief to America’s Families, Schools and Small Businesses Act includes a provision for expanding qualified expenses for 529 plans that is similar to the one proposed in Senator Ted Cruz’s Student Empowerment Act (S. 157), but the provision will expire at the end of 2022.

The legislation also provides $300 per week in federal unemployment benefits through December 27, 2020, a second round of Paycheck Protection Program (PPP) funding, liability protections for businesses and schools that reopen, short-term financial support for childcare providers and a school voucher program. There’s also additional funding for financial aid grants to students to cover any component of the college’s cost of attendance and coronavirus-related emergency expenses through the Higher Education Emergency Relief Fund.

The new legislation is a slimmed down version of the HEALS Act proposal that was introduced on July 27, 2020.

The enhancements to 529 plans allow additional qualified expenses for elementary and secondary school students beyond K-12 tuition. The additional qualified expenses include books, online educational materials, tutoring, testing fees (including achievement tests, AP exams and college admissions tests), dual enrollment costs and educational therapies for students with disabilities (e.g., occupational, behavioral, physical and speech-language therapy).

These expenses are currently considered qualified expenses for Coverdell education savings accounts, but not 529 plans.

Senate Republicans do not have enough votes to pass the legislation on their own without Democratic support. Nevertheless, the legislation is a sign that negotiations over the next COVID-19 financial relief package have reopened after the August recess. Democrats and Republicans both want to pass the next financial relief package before the elections on November 3, 2020.

[Update: The legislation failed a procedural hurdle on September 10, 2020. The vote, 52 to 47, did not reach the required 60-vote majority.]

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