White House plan could be bad news for college savings

HOUSTON (KTRK) -- In a time when the high cost of student loans is under fire, the one avenue used to help save for college tuition is now being threatened... by the White House.

One of President Obama's ways to overhaul the tax code, eliminating loopholes and boosting revenue, is the 529 savings plan, in which families contribute after-tax income to pay for children's college costs. The interest earned on the accounts is tax exempt when withdrawn for college enrollment.

Under the president's plan, the tax exempt status would end, which for some people means it would be taxed twice.

Houston CPA Bob Martin says there are 12 million such accounts in the U-S, with an average balance of $21,000.

"That tells me it's a program used by middle class parents who want to send their children to college. This would not help the middle class."

Martin predicts the savings plan would be abandoned without the tax incentive, forcing more people to turn to student loans.

Perhaps the biggest obstable to the change will be a Republican-controlled Congress. Of the chance that the 529 savings program would be overhauled, Martin predicts, "no way."