People with student debt may soon have another way to pay their monthly bills. What's unclear is how much of a help that new method will be.
The House Ways and Means Committee earlier this month unanimously passed the Secure Act, which would expand 529 accounts to cover costs beyond college to those associated with apprenticeships, home schooling — and up to $10,000 in student debt.
The bill now heads to the full House. The Senate Finance Committee introduced a companion bill that is expected to pass with bipartisan support, after which it will go up to the president.
The investment accounts, which are named after Section 529 of the Internal Revenue Code, are offered through states to encourage people to save for college. Withdrawals put toward qualifying education expenses are tax free.
Under the new provision, borrowers who have an account could use it to cover the principal and interest on their loans. The changes would apply to account distributions starting from January of 2019.
"Anything that provides families with more flexibility in how they use 529 plans would be beneficial," said Mark Kantrowitz, publisher of SavingForCollege.com.
The list of uses for which the accounts can be tapped has been growing: K-12 private school tuition was added as an eligible expense in the latest overhaul to the federal tax code.