[Congressional Record Volume 150, Number 128 (Saturday, October 9, 2004)]
[Senate]
[Pages S10987-S10988]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. CANTWELL:
  S. 2972. A bill to amend the Internal Revenue Code of 1986 to 
permanently increase the maximum annual contribution allowed to be made 
to Coverdell education savings accounts, and to provide for a deduction 
for contributions to education savings accounts; to the Committee on 
Finance.
  Ms. CANTWELL. Mr. President, I rise today to talk about increasing 
educational opportunities by improving a tax-free way to save for 
college. A college education is invaluable in today's workforce, 
requiring new skills and a post-secondary education to stay competitive 
in our global economy. That's why I am introducing two pieces of 
legislation that will help make paying for college easier:
  The Education Savings for Students Act and College Savings Act both 
expand current Coverdell education savings accounts by permanently 
increasing the annual contribution amount to $5,000.
  The College Savings Act would allow families to deduct from income 
the amount they contribute to their education savings account. The 
Education Savings Act keeps the current conditions under Coverdells 
that investment earnings grow tax-free and withdrawals from their 
account are tax-exempt when their child goes to school, but permanently 
increases the minimum annual contribution from $2,000 to $5,000.
  Both bills provide a financial incentive to put away money for 
college where parents have the ability to save now through deductible 
contributions or bank on projected savings through tax-deferred 
earnings and withdrawals.
  It's incredible how fast kids grow. One day they're in kindergarten, 
and the next day they're packing up and leaving for college. What's 
even more incredible is that higher education costs grow just as fast 
as they do.
  I understand that parents have a lot to worry about, especially when 
their children are young. But with rising college costs, parents must 
also be concerned about how to pay for their child's college education. 
Mounting tuition costs and prices for books and materials, plus room 
and board have made colleges and universities less affordable for most 
families.
  College is expensive. There are many parents whose children have 
aimed to go to college, but soon discover they can't afford it because 
of rising costs.

[[Page S10988]]

  In 2002, the National Center for Public Policy and Higher Education 
reported national trends which--if remain unaddressed--will have 
adverse consequences for expanding students' opportunities to pursue a 
higher education and future career.
  This report found that over the last two decades, the cost of 
attending two- and four-year public and private colleges have not only 
grown more rapidly than inflation, but faster than family incomes, 
increasing the share of family income that is needed to pay for tuition 
and other college expenses. From 1991 through 2001, tuition at four-
year public colleges and universities rose faster than family income in 
41 states, including my home State of Washington.
  The Washington State Higher Education Coordinating Board reports 
that, over the last ten years, tuition and fees have far outpaced 
family income, increasing 89 percent compared to 51 percent in per 
capita personal income in my state. In comparison, the cost of most 
consumer goods increased an average of 20 percent during the same time. 
And, per capita personal income in Washington increased 51 percent 
during this period.
  As a result, more students and families at all income levels are 
borrowing more money than ever before to pay for college. In 1981, 
loans accounted for 45 percent and grants for 52 percent of federal 
student financial aid. In 2000, loans represented 58 percent of Federal 
student financial aid, and grants represented 41 percent.
  Unfortunately, the steepest increases in college and university 
tuition have been imposed during times of greatest economic hardship. 
Just in the past three years, our economy has experienced a loss of 1.8 
million private sector jobs and 2.7 million manufacturing jobs. It is 
my priority that we prepare our workers for the jobs of today and the 
careers of the future. If we want to maintain our economic 
competitiveness, we need to make college more affordable. We must keep 
up with the demand for skilled workers across all sectors of the 
economy.
  In February, the Bureau of Labor Statistics reported that six of the 
ten fastest-growing occupations in the U.S. economy require an 
associate's degree or bachelor's degree, and that all ten of these 
careers will require some type of skills training. By 2010, 40 percent 
of all job growth will require some form of post-secondary education.
  Workers with a college degree make 75 percent more than those 
without. A college education pays tremendous dividends--not just to 
individuals, but also to their entire communities. On average, a one-
year increase in a metropolitan area's educational level raises wages 
by three to five percent.
  Affordability is key to expanding opportunities to go to college. 
Let's face it, we're not all going to pay for college by winning the 
lottery. Saving for college early and often will help lift the 
pressures off of parents who are feeling the financial squeeze of 
increased tuition and fees.
  For these families, Coverdell Education Savings plans provide a 
needed relief for the middle class. The purpose of education savings 
plans are to increase saving by increasing net returns. Today, parents 
can put up to $2,000 a year into a Coverdell Education Savings account. 
The actual contribution is not tax deductible, but all earnings in this 
account are free from taxes when they are withdrawn to pay for school.
  However, the current $2,000 annual limit on Coverdell contributions 
will be repealed in 2010 unless Congress acts to extend it. If we don't 
extend the contribution level, the maximum contribution will drop to 
$500.
  While the current tax benefit makes it easier to save for college, 
the Education Savings Act would increase the annual contributions from 
$2,000 to $5,000 and making this change permanent ensures greater 
savings for families. By increasing the amount parents can put aside 
for their children's college savings, middle-income parents will be 
able to more easily save for their child's college education.
  Say for example, parents start saving when their child turns eight 
years old. If they put away just $100.00 a month--at an interest rate 
of savings of four percent--by the time their kid turns 18, their 
account would have earned more than $12,400 in interest. Parents will 
save over $3,100 in taxes when that child is old enough to go to 
school.
  In addition to projected savings, parents also have the option to 
save now. The College Savings Act would offer families the ability to 
deduct their contributions each year----
  Both of these bills, the College Savings Act and the Education 
Savings Act are financial incentives for people to save by allowing 
families to deduct the amount they contribute and take tax-free 
earnings when their child is ready to go to school, would further 
lessen the financial burden that parents bear by saving money early and 
often.
  Permanently expanding the Coverdell maximum contribution from its 
current threshold of $2,000 to $5,000 a year and allowing this 
contribution to be tax deductible is a common-sense savings vehicle 
that keeps future college costs from spinning out of control. 
Increasing contribution caps will make school more affordable at a time 
when a college education and advanced job training is becoming more and 
more important for economic success.
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