What would happen to 529s...if college became free?

[Dicast]

What do you think would happen to 529 plans if colleges became free as Bernie Sanders would like?  Do you think there would be any removal of the 10% penalty or maybe a one time rollover to an IRA?  I have no actual expectation that college will become free but was just thinking about the consequences of putting too much into a 529.

[conniebird]

Ha, I don't see this happening. I am planning to fund the equiv of state college tuition + room/board only - won't be enough for a private. I will prolly do the rest in a taxable to give me flexibility - can use it on their college/grad, maybe their wedding, etc; but won't be tied up in a 529. I do get a state income tax deduction but there is a limit so I won't be doing much more above it if at all.

[RogueDadMD]

Dicast wrote:

What do you think would happen to 529 plans if colleges became free as Bernie Sanders would like?  Do you think there would be any removal of the 10% penalty or maybe a one time rollover to an IRA?  I have no actual expectation that college will become free but was just thinking about the consequences of putting too much into a 529.

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If anything actually happens (which is doubtful), it's more likely that community colleges will be free and state colleges subsidized for those under a certain income limit.  My guess is any high earners will not qualify, and if anything the actual charged tuition will go up to make up for shortfalls in funding from the subsidized/free crowd, similar to Medicaid and Medicare vs. private insurance now.

HRC and Bernie won't be giving free admission to high end state universities for people in the top 5-10% of income brackets.

[PhysicianOnFIRE]

Even if tuition & fees went away, there are other costs that the 529 money could be used to cover, such as room and board, books and supplies, etc...

It would be interesting to see if there were any options, but I doubt "free" college in anywhere on the horizon.

Best,

-PoF

[VagabondMD]

I have both a senior and freshman in high school. I wish that "free college tuition" were my biggest problem. I would gladly pay the 10% penalty for the trade.