SoCal Parents React To Future Tax Proposal On 529 College Savings Plans

LOS ANGELES (CBSLA.com) — For years, millions of Americans have taken advantage of a tax-free way to save for their children's college educations.

The 529 College Plans allow for parents to start college funds for their children in an account where growth is tax-free when used for schooling.

This week, President Barack Obama announced he would like to eliminate the tax benefit of these plans, and use the revenue to fund a $2,500 education tax credit instead.

CBS2's Bobby Kaple spoke with Ingrid McConnell, a Flintwood mother of four who explained she set up a 529 plan for all her children when they were little.

McConnell went on to explain she felt that getting rid of the tax exemption would remove the incentive for families to save for their children's education.

"Overall, it was a great way for us to save for college for our kids," McConnell explained. "It's something we wouldn't have done if it wasn't there."

Economists have speculated that the majority of parents who use these plans actually make more than the average American.

Kaple explained the Obama's proposal would only be applied to future 529 plans.

Parents who have set up these accounts would not be affected by the changes.

"The main benefit for us is that it's a forced savings," explained McConnell. "We were putting in money as soon as they were born."

Republicans, however, reported that proposed changes to 529 plans will likely not happen as they have shut down the idea in Congress thus far.

529 plans were originally established in 1996, when Bill Clinton served as president.