WASHINGTON, DC — A bipartisan bill in Congress would create a new way for first-time buyers to use leftover education savings for a home purchase. The First-Time Homebuyer Empowerment Act, introduced Aug. 4 by Sens. Jon Husted of Ohio and Michael Bennet of Colorado, would allow up to $35,000 in unused 529 savings to be transferred for a first home without the usual penalty.
The proposal is aimed at one of the biggest hurdles for new buyers: coming up with cash for a down payment. Under current rules, 529 plans are designed for education expenses, though some unused money can already be used for certain school costs, student loan payments, or moved into a retirement account under specific conditions. The bill would add a first-home purchase as another eligible use.
What The Bill Says
The measure would apply to money families have left over after education expenses are covered. Instead of leaving those funds idle or limiting them to other existing uses, the bill would let a buyer move as much as $35,000 from a 529 plan toward the purchase of a first home. The key feature is the penalty-free treatment, which could matter for households trying to avoid drawing from retirement accounts.
Fast Company reported on the proposal and noted that existing federal rules already let first-time buyers withdraw up to $10,000 from an individual retirement account for a qualifying home purchase without the typical early-withdrawal penalty. The new 529 provision would expand the pool of potentially available money, but only if Congress approves the legislation and the change becomes law.
Why It Is Advancing
The bill lands at a time when housing costs remain high enough to make homeownership difficult for many Americans. Bennet said the idea would help Colorado young people and working families use savings they already have to cover a down payment and move closer to owning a home. Husted framed it as a way to help working families get ahead and make life more affordable.
The measure also reflects a broader policy approach: rather than creating a new subsidy, it would loosen the rules on money families have already saved. That makes the proposal different from programs that require a fresh appropriation or grant. The source does not say when the bill might get a vote, and it is not yet clear whether lawmakers will move it forward in its current form.
What Buyers Should Watch
If the bill passes, the change could give first-time buyers another source of funds for a down payment, especially households with leftover education savings. It would not automatically send money to anyone, and it would not change housing prices or mortgage terms on its own. It would simply create a new permitted use for some 529 balances.
The House has a bipartisan companion version introduced by Reps. Tom Barrett of Michigan, Tracey Mann of Kansas, Mark Alford of Missouri, and Lou Correa of California. Readers who want to track the proposal can follow the bill’s progress in Congress and look for updates from the sponsors and legislative text. For now, the proposal remains pending and would need approval from both chambers before taking effect.
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