ERIC Number: ED353911
Record Type: Non-Journal
Publication Date: 1986
Reference Count: N/A
IRA's for College Savings.
McPherson, Michael S.; Byce, Charles R.
This paper analyzes the merits of proposals to encourage saving for college by permitting families to use funds accumulated in Individual Retirement Accounts (IRA's) to pay postsecondary education expenses. The paper argues that tax treatment of such expenditures might parallel that for expenditures of IRA's for retirement purposes--deferring tax on both contributions and accumulated interest until withdrawal. Or, alternatively it could be made more generous by taxing withdrawals at a lower rate. The paper reviews savings incentives, and argues for policy analysis that would distinguish the use of saving incentives to stimulate aggregate total saving from their use in encouraging the reallocation of saving toward preferred uses. A look at alternative incentives for college savings describes how such a plan might operate through tax preferences or through direct expenditure programs. A further section discusses how to design an IRA for educational savings. The paper moves on to look at how such a program would operate as a family investment opportunity, covering tax implications, integration with the financial aid system, and alternative financing. The section following addresses public policy assessment covering cost, equity, and behavioral effectiveness. The final section summarizes the analysis. Contains seven references. (JB)
Descriptors: Educational Finance, Federal Programs, Government Role, Higher Education, Money Management, Parent Financial Contribution, Paying for College, Policy Formation, Public Policy, Taxes
National Institute of Independent Colleges and Universities, 122 C Street, N.W., Suite 750, Washington, DC 20001.
Publication Type: Information Analyses; Opinion Papers; Reports - Evaluative
Education Level: N/A
Authoring Institution: National Inst. of Independent Colleges and Universities, Washington, DC.