May 19,1999


WASHINGTON -- The Senate Finance Committee today reported an original bill, The Affordable Education Act of 1999, by a vote of 12 to 8.

As approved by the Finance Committee, this legislation allows families to contribute up to $2,000 annually to an education IRA (current law only allows $500 annual contribution); makes distributions from college savings and tuition plans tax-free (current law is tax-deferred); extends tax-free treatment of employer provided educational assistance and allows students to deduct student loan interest for the life of the loan (current law is 60 months).

Further, this legislation also includes a package of provisions designed to help localities with the construction and renovation of their public schools. The package keeps the control of this issue at the local level, and also works within the existing framework of tax-exempt bonds.

The Committee bill, as reported, includes the following provisions:

• Raises the contribution amount of the education IRAs from $500 to $2000 per year and permits withdrawals for K-12 expenses.

• Allows tax-free distributions from state-sponsored and private prepaid college tuition plans.

• Extends the tax-free treatment of employer-provided educational assistance for undergraduates from June 1, 2000 through June 30, 2004 and for graduate students from January 1, 2000 through June 30, 2004.

• Eliminates the 60 month limitation on the deductibility of student loan interest.

• Provides a package of tax incentives, under the tax-exempt bond rules, for construction of elementary and secondary public schools.

The package is offset by revenue raising proposals, many of which have previously been approved by the Finance Committee.