NEST account payments for student loans advanced

Nebraska educational savings plan trust accounts could be used to repay student loans under a bill advanced from general file March 2.

Under current law, the accounts may be used to pay a beneficiary’s qualified higher education expenses.

Under LB864, introduced by Sen. Tim Gragert of Creighton, they also could be used to pay the principal and interest on the qualified education loan of a beneficiary or the beneficiary’s sibling.

The bill would cap aggregate total payments at $10,000 per person.

Gragert said the best use of 529 funds is to spend them up front and avoid taking out student loans. Some families, however, have leftover 529 funds that they would like to use to pay off student loans, he said, and LB864 would allow them to do so.

“Expanding what constitutes a qualified withdrawal under the 529 plan will give families more flexibility in spending the money that they have worked so hard to save over the years,” Gragert said.

Sen. Megan Hunt of Omaha supported the bill, saying it would update Nebraska law to conform with changes made at the federal level in 2019. LB864 could help alleviate at least a small portion of the student loan debt burden on Nebraskans, she said.

“It seems like good sense to me that, if you can use 529 accounts to pay for tuition, then you should also be able to use 529 accounts to pay for past tuition, which is student loans,” Hunt said.

LB864 advanced to select file on a vote of 40-0.