The Financial Services Institute is urging the U.S. Senate to pass a bill that would modernize 529 college saving plans.

In a letter sent to the leadership of the Senate Finance Committee on Tuesday, FSI President and CEO Dale Brown urged the Senate to pass S. 335, which would streamline the tax and penalty rules surrounding 529 plans. The Finance Committee is expected to begin marking up the bill on Wednesday.

“Unfortunately, even by taking advantage of current 529 plans, the soaring costs at America’s colleges and universities has made it increasingly difficult for parents to properly plan and save for the costs associated with their children going to college,” Brown writes. “Because of this, FSI and its members believe that 529 plans must be improved to better fit the needs of American families and help them more effectively save for the increased costs of higher education. Therefore, FSI strongly supports S. 335 and its goal of updating the 529 College Saving Accounts to match the needs of today’s families and future college students across the United States.”

If signed into law, S. 335 would eliminate the penalties and taxes incurred when refunds from colleges are redeposited within 60 days after students are forced to unexpectedly drop out from school.  The bill would remove distribution aggregation requirements, which mandate the aggregation of gains from multiple 529 plan accounts with the same holder and beneficiary for tax purposes, “thus simplifying the 529 process and reducing paperwork burdens,” Brown writes.

The bill would also update 529 college saving plan rules to designate computers as a qualified educational expense.

The measure's sponsor, Sen. Chuck Grassley, R-Iowa, released a statement calling for bipartisan support on Monday.

“These reforms will make it even more appealing for parents to use 529 college savings plans,” Grassley said in a statement released on Monday.  “The additions give more flexibility for using the tax-free savings.  The more flexibility, the more people use something like this.  The bill also sends the message to families that Congress supports this program and will fight efforts to get rid of it.”

The House passed its version of the bill, H.R. 529, in February.