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By JIM NEWTON

News-Sun

As financial aid options rapidly shrink for college students in Illinois, proposed federal legislation could provide a 401K-style account to assist families saving for tuition.

The 401 (Kids) Family Savings Act of 2009, authored by U.S. Rep. Judy Biggert, R-Hinsdale, and cosponsored by U.S. Rep. Mark Kirk, R-Highland Park, allows any individual -- including parents and grandparents and other relatives -- to set aside a total of $2,000 annually per child in a 401 (Kids) Savings Account.

The Act has been forwarded to the Ways and Means Committee.

Like a Roth IRA, money would be contributed to the 401 (Kids) account after taxes, with interest accumulating tax-free. The balance could be used tax-free for approved purposes, including education expenses, the purchase of a first home or retirement.

Kirk said the legislation would help fill gaps created by cuts in student aid at both the federal and state level.

"A 401(Kids) account would give parents personal control and ownership of an account they could build seamlessly, even if they moved." Kirk said. "Instead of relying on the bad decisions of Illinois officials or one massive federal program, moms and dads would own their own accounts and make their own decisions, much like with their 401(k)."

Kirk said many students rely on the state's Monetary Aid Program (MAP) to help pay for school, which are expected to disappear next semester without additional funding from the Illinois General Assembly.

"In Illinois, state leaders brought us to a college funding crisis," Kirk said.

Kirk also noted that the U.S. House recently passed a resolution wiping out the Federal Family Loan (FFEL) program that enabled 4,400 banks to loan $70 billion to students "in favor of a one-size-fits-all government program that works with less than a third of banks providing loans of less than half the FFEL program."

On another front, Illinois families have lost considerable funds in Illinois' 529 college savings programs, including Bright Start, which lost $85 million, a 36 percent drop, last year just in its "Core Plus" account.

"It's clear we need new resources for families -- under their own control -- to pay for school," Kirk said.

This article was edited to comply with Franking Commission guidelines