SACRAMENTO (CBS13) – All babies born in California in the new year could start with at least 25 dollars in a college fund unless a parent chooses to opt-out of the Scholarshare 529 program.
Assembly Bill 15 unanimously passed the California Assembly Thursday.
It would establish a 529 college savings account for every California resident born after January 1, 2020. The California Department of Public Health would be responsible for getting the birth data to the newly established Scholarshare Investment Board within 90 days of a child’s birth. Parents and guardians would then have the opportunity to opt-out of the program.
The Assembly Appropriations Committee estimates it will cost $12.5 million a year to fund savings accounts, another $1.6 million a year for the SIB to administer the program, and an additional $1,000 a year for the CDPH to provide the necessary birth data. That money will come from the state’s Ongoing General Fund.
Once a child enrolls in school, and the board receives documentation of that enrollment, the board will be required to make a payment using the original deposit and any cumulative investment earnings. Those who do not enroll in higher education would forfeit the deposit and associated earnings.
According to the bill analysis:
“The account seed money will not grow much over time if the initial seed is the only contribution to the account. Over 18 years, the time after which a student might access their funds for college expenses, and at a 7% growth rate, the seed money would grow from $25 to $85; at 5%, to $60; at 3%, to $43. However, the bill allows additional state or non-state sources to contribute and those funds, which could increase the value of the accounts. Moreover, as noted in the policy committee analysis of this bill, even if the amount of money in the account is not significant, research indicates having a savings account for college, regardless of the amount of funds in it, has an effect on children’s college-going rate, especially among low-income students.”
The Scholarshare 529 program is based on similar programs in other states. Oklahoma established the SEED for Oklahoma Kids in 2007 and it involves 2,500 children. Maine, Rhode Island, Connecticut, and Pennsylvania modeled their program’s on Oklahoma’s.
The County Welfare Directors Association of California supports AB 15, writing “AB 15 will give each child, a financial boost in paying for college and build the aspirations of children and their parents around higher education.”