Success of DE college savings pilot paints promising future, says Treasurer
DELAWARE – A pilot incentive program aimed at getting Delawareans to start saving for higher education earlier is showing promising numbers.
In the last six months of 2022, First State, First Steps contributed $37,700 to Delawareans’ DE529 Education Savings Plans. Delaware’s Treasury matches the first $100 put into newly opened accounts if the beneficiary is five years old or younger, and is a Delaware resident.
“Really, the concept is to help people to entice them to start saving at a really young age. We start thinking about little ones when they’re just born, and what their future looks like. Now is a great time to be investing,” said Delaware Treasurer Colleen Davis. “The hope is that when you start early, it makes it easier to really prepare for higher education for children.”
Getting the Message Out
Davis says the numbers are painting a bright picture for the future of Delaware’s youngest learners.
“We really are excited about the numbers that we’re seeing because it, to me, means we’re effectively messaging, and enticing people to get started and save,” said Davis. “It’s possible, and the earlier you start, the more incentive there is to just keep that going. We’ll look for, I think, other opportunities down the road to continue this type of activity.”
Savings Beyond College
Currently, Davis says her team is working on building out an updated platform to support Secure 2.0. Under the new system, Davis says certain participants will be able to see savings long after their college career is over.
“Under Secure 2.0, we now have the opportunity for this type of a savings vehicle to become available once people age out of that earlier time frame when you might be looking to get an education,” said Davis. “We’re creating more flexibility within these savings vehicles to eventually roll them into IRAs, and under Secure 2.0 we’re going to have the ability to do that.”
The new platform comes as a recent tax break is bolstering the program, says Davis. Participants don’t pay any taxes on the money as it grows. And, withdrawals for expenses like tuition, fees, and books are federal and Delaware income tax-free.
Contributions made in 2022 are also up for a major break: federal adjusted gross income will be reduced for any contribution up to $1,000. The reduction is $2,000 for joint returns. Deductions to not apply to tuition in connection with elementary or secondary public, private, or religious schools. Individuals with federal AGI greater than $100,000, or $200,000 for joint returns, are also disqualified. Deductions for couples with an AGI below $200,000 are capped at $2,000.
Davis says as the program grows, so too does interest from would-be participants.
“While we saw an increase in enrollment for children ages zero to five, we also saw increased enrollment for a variety of different ages,” said Davis.” My hope is that we’re creating incentives across the board to really get people engaged in preparing for the cost of higher education.”