ENCOURAGING AMERICANS of modest means to save for college is an indisputably worthy policy goal, which is why most states offer tax-advantaged savings plans to people who put aside funds for their children’s postsecondary education. The trouble is that those who take advantage of the plans tend to need them least: upper-middle-class and wealthy parents.
Now Maryland’s Democratic leaders are doubling down on that approach by proposing to offer matching grants for college savers with incomes up to $225,000. The idea is over-the-top and out of line with benefits offered by other states.
Legislation unveiled recently by the two top lawmakers in Annapolis, Senate President Thomas V. Mike Miller Jr. (D-Calvert) and House Speaker Michael E. Busch (D-Anne Arundel), would provide such matching grants on a sliding income scale to help people cover college costs. That’s fine in theory, if the theory is to target the benefits at struggling families for whom college is unaffordable. But since when does an annual income of $225,000 qualify as struggling?
About 10 states provide modest matching funds under 529 college savings programs, but none comes close to the subsidy for the well-to-do that Mr. Miller and Mr. Busch have in mind. Some offer one-time incentives, typically up to a few hundred dollars, to open a college savings account. A few others offer ongoing annual matches on a sliding scale of income to people of genuinely modest means. An example is Kansas, which offers matching grants up to $600, but only for households of modest means — for instance, a family of four whose adjusted gross income is less than $48,500.
By contrast, under the Miller-Busch plan, those with incomes under $100,000 who contributed just $25 to a savings account would receive a state grant of $250. The same state grant would be available to savers who contributed $250 with annual incomes of $175,000 to $225,000.
Why should Maryland, whose median household income is $76,165, subsidize residents whose incomes are triple that amount? Wealthy residents already enjoy enormous subsidies in the form of in-state tuition breaks and tax deductions for 529 accounts. The new Democratic proposal amounts to more welfare for the well-to-do.
Granted, affording tuition and fees can be a herculean task for most households and is a particular burden for middle-class families who make too much to qualify for Pell Grants and other need-based scholarships. Still, affluent families are already far more likely to have state-sponsored college savings accounts than those with more modest incomes. They require much less in the way of incentives to save, so why offer it to them?
At a cost of $10 million by 2020, the matching-funds proposal is not budget-busting. Its sponsors say it would provide grants to 20,000 new account holders. But the state already provides $15 million in annual tax deductions to Marylanders who contribute to 529 college savings plans. Isn’t that enough coddling of the comfortable?