Assemblywoman Annie Rabbitt (R,C,I-Greenwood Lake) today announced a change in the law, which will make it easier for parents and students to save for college by allowing relatives, employers and others to contribute to state-approved college savings accounts. The higher education law, signed by Governor Paterson last week, eases restrictions on third party contributions to college savings funds, called 529s, including the New York State College Tuition Savings Program. This program began in 1998 and allows for tax-deductible contributions and tax-free withdrawals for qualified college expenses.
“Higher education costs have risen faster than the rate of inflation in recent years,” said Rabbitt, “leaving many families wondering how they will pay for their son’s or daughter’s college tuition. State law has not helped matters: New York is currently one of two states which do not permit third parties to make deposits into 529 college tuition savings accounts. I am proud to have voted yes on this important expansion of our program, and I believe that by opening up contributions to relatives and employers we can transform 529s into the standard model for putting money away for college. This is great news for students and their families.”
While the New York State College Tuition Savings Program has helped contributors pay for $8.3 million in college expenses, until now it has only accepted contributions from the individuals who created the account, i.e., parents. Furthermore, over $57 million in contributions have been rejected from other parties since 2003 because of this rule. The revision will allow anyone, including family members, employers or a scholarship fund, to contribute. Contributions from account holders will remain tax deductible.