During a town hall meeting held at Ivy Tech Community College last Friday, President Obama proposed a potential plan to 400 students about scaling back tax benefits for college savings accounts. By proposing this plan the president anticipated bringing in $1 billion over the course of 10 years.
Obama planned to save money with this proposal by removing the 529 savings accounts that would shift into other loan programs that could possibly serve a bigger base. In return, it would take advantage of 12 million family college savings plans and this money would be withdrawn with no tax on earning to pay for postsecondary education cost.
In this plan, Obama wanted to use the savings to help fund his proposed community college plan to make two years free for students. The proposal was later shot down by lawmakers from both the Democratic Party and the Republican Party out of fear that the plan might have hurt students and families more than actually helping them financially.
The president’s plan might have fallen through, but students on the campus of Florida A&M University have their thoughts about how the possible plan might have affected HBCU’s.
According to Alexa Guy, fourth-year political science student from West Palm Beach, Fla., this plan can impact the student body.
“If President Obama were to use the billion plus dollars generated from this provision to provide two years of free community college, I believe HBCUs such as our very own would suffer from a decrease in enrollment. HBCUs, more particularly FAMU are some of the more affordable institutions in the country, so if this were to take place, much of the incentive to attend schools like FAMU would decline.” Guy said .
According to David Evans, Jr, FAMU financial aid debt counselor, the plan might have proposed a greater risk for students as they matriculate throughout college.
“Our student population which has a number of students who use similar plans, such as Florida Prepaid would not feel a drastic affect overall. Our population typically does not include students who come from that type of financial background,” Evans said. “Per President Obama, the savings, which were estimated to be around $1 billion over a 10 year period would not be sufficient to move forward. The cost to send students to college for the first two years would far exceed this amount, although specifics have yet to be released. All in all, President Obama and his administration will look to find funds through another source, to support his vision.”
FAMU administrators discussed in greater detail about how the possible plan could’ve affected students and their families in the future.
According to Nigel Edwards, Associate Vice President of Student Affairs, if the plan had been approved as constructed, this would increase the tax burden on parents. When you increase the tax burden you reduce discretionary income. Reducing discretionary income, in theory, minimizes the amount of funds available to pay for educational costs.
“If families did not have other means or the discretionary income to pay for school out of pocket, they would conceivably have to borrower to cover the costs of paying for school. In order to reduce the reliance on student loans, families must begin to save for their children’s college investment,” Edwards said.
After getting shot down by both parties, the president later reconsidered scaling back on savings accounts. As a result, President Obama has decided to pay out of pocket for the two-year community college free plan.