Sen. Rand Paul’s Bill Would Allow People To Fund Education With Pre-Tax Cash From Retirement Accounts

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While Democrats advocate left-wing policies such as tuition and fee free public college and mass student debt cancellation, Sen. Rand Paul (R-KY) has a plan that will help students and their families finance higher education costs with their own money stockpiled in retirement accounts.

In an op-ed the Kentucky Senator explains that his Higher Education Loan Repayment and Enhanced Retirement (HELPER) Act would allow people to use the money in their 401(k) or IRA to fund college costs or to pay off student debt.

Individuals could spend a maximum of $5,250 per year to pay for their own expenses or those of their spouse or dependents—and that money would be both “tax and penalty free.”

“My bill would instead allow individuals to take, tax and penalty free, up to $5,250 from their 401(k) or IRA annually to pay for college or to pay back student loan debt, and it can be used to pay tuition and expenses for a spouse or dependent,” Sen. Paul explains in the op-ed. “My bill also allows employer-sponsored student loan and tuition payment plans to be tax free up to $5,250, a common benefit new graduates are seeking from employers.”

https://twitter.com/RandPaul/status/1201955465565003776?ref_src=twsrc%5Etfw

He points out that by pooling resources a student and that student’s parents could spend a sum of $15,750 yearly: “Furthermore, if two parents and their college-bound child each put aside the maximum amount of $5250 per year, that would make a total of $15,750 pre-tax dollars per year available to pay for college.”

The legislation also offers other financial benefits for people saddled with student loans:

“My bill also addresses the cap and phase out on deducting student loan interest — repealing it. Student loans don’t just disappear when you advance in your career and earn more,” Sen. Paul writes. “Moreover, capping and phasing out the interest deduction can have the effect of creating a tax penalty, disincentivizing workers from taking higher-paying jobs.”

The bill “would also offer workers the choice to have an employer contribution to a 401(k) count as a Roth contribution,” according to a press release.