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Senator Megan Hunt Introduces Legislative Bill 835 to Allow 529 NEST College Saving Plans to Pay Student Loans
Lincoln, NE— 1.6.22 — Today, Senator Megan Hunt introduced LB 835 to provide an option that could help relieve student debtors’ loan balances: the 529 NEST college saving plan. Currently, 529 plans allow families to contribute money to an account, which grows on a tax deferred basis and can be withdrawn tax-free if it’s used to pay for qualified education expenses, like tuition or textbooks. In 2019, the federal SECURE Act created new flexibilities for 529 college savings plans, including one that allows these plans to be used to make student loan payments. However, the state’s existing statute prohibits Nebraskans from utilizing the newly granted 529 options. LB 835 will permit 529 planholders to use account assets to pay up to $10,000 in student loans per beneficiary to help.
Data from the Department of Education show nearly a quarter-million Nebraskans have student loan debt, owing $7.7 billion to the federal government as of September 2020. Harmonizing state statute to match federal statute is not only good governance, but provides a small way to help address the rising national student debt crisis. This is good news for parents and grandparents who work and save to set money aside for their child or grandchild’s education. If 529 assets can be used to pay tuition, it makes sense that they can be used to pay student loans for past tuition as well.
“Student debt holds entrepreneurs back from starting businesses, holds families back from buying homes, holds workers back from saving for retirement and holds our economy back,” Hunt said. “It’s time to start looking at realistic ways to address the crushing debt students live most of their lives with. Our economy isn’t money. It’s people. That should be our focus.”