... a guest column from U.S. Senator Chuck Grassley of Iowa

Saving for College

Congratulations to the thousands of young Iowa graduates accepting diplomas in 2005. This is a time to celebrate and reflect on the achievements, hard work and sacrifice it took to complete high school or earn a college degree.

It’s also appropriate to congratulate the parents, who no doubt are shedding tears of joy and sadness as they close another chapter on the upbringing of their children.

Parents work hard day in and day out to provide a safe, comfortable and happy home for their children. Iowa has one of the highest percentages of two-income families in the nation, with both parents earning a paycheck to help make ends meet.

Paying the bills, putting gas in the car and squeezing in a family summer vacation all compete with the limited resources that make up a family budget.

Putting money away for retirement, saving for a college education and squirreling away funds for use in an emergency sometimes may seem like a luxury rather than a necessity. But when it comes to higher education, statistics will show that tightening the belt today to help pay for college tomorrow will pay off big time in the future.

A college education is one of the best investments money can buy. Parents work so hard to build a solid foundation for their kids. Taking advantage early of savings opportunities for higher education will help pave the way towards a bright future for your kids. Just consider the gap in earning potential between someone with a high school diploma and a four-year college degree. Over a lifetime, the disparity in earning power exceeds $1 million.

No wonder so many parents are committed to making the sacrifices now to get a head start on their child’s higher education expenses. The sooner, the better too. Double-digit hikes in college tuition year after year creates a formidable debt burden for new graduates to carry or makes it an unaffordable opportunity for others. Carving out money now and saving over the long term will make a big difference about the choices available to your children.

Thanks to a college savings program that took root nearly a decade ago, more than 7 million kids today are beneficiaries of college savings plans known as Section 529 plans or qualified state tuition plans.

As testament to Iowa’s commitment to higher education, our state has among the highest number of 529 accounts operating in the country. Compare Iowa’s 105,000 to California’s 154,000. Iowans have accumulated about $1 billion in these plans known as College Savings Iowa. Parents and grandparents find the state-administered accounts are a safe, easy and affordable tool to access and save for higher education.

In Washington, I’m working to make 529 plans a dependable tool that Iowa parents can count on permanently.

As chairman of the tax-writing Senate Finance Committee, I successfully led an effort four years ago to improve and expand access to 529 plans as part of the landmark 2001 federal tax relief law.

Popular upgrades added in 2001 to make 529 plans even more helpful for families working hard to save for their child’s higher education expenses included:

n Providing tax-free treatment for distributions for qualified higher education expenses, including tuition, room and board, books and other fees

n Allowing educational institutions to establish prepaid tuition plans

n Increasing the amount of room and board eligible to count towards qualified higher education expenses

n Permitting the use of the HOPE Credit or the Lifetime Learning Credit in the same year as qualified expenses from the 529 plans, as long as distributions aren’t used for the same expense

n Letting beneficiaries transfer amounts between qualified tuition programs once every 12 months

n Expanding the definition of family to include first cousins for purposes of transfers and changes to designated beneficiaries of the plans

An Iowa family with three young boys traveled out to the nations capital in May to advocate making permanent theses tax-advantaged college savings plans. They’ve already started making the financial sacrifice to put money away for their sons’ college education.

As chairman of the Senate Finance Committee, I’m working to make sure the rug doesn’t get pulled out from underneath them or the tens of thousands of other parents and grandparents in Iowa who are contributing to these college savings plans.

It’s smart public policy to make it easier for families to get a head start on making college an affordable opportunity for their kids.