California 529 Plan And College Savings Options
California has a 529 plan called ScholarShare that can help you save for college. California also has a 529 Able Plan as well.
If you live in California, these might be good options for you to save for college.
These programs are designed to help make college more affordable - so that you can get the education you need. By saving for college early on, you can make paying for college easier down the road.
If you're not quite sure how 529 plans work, check out this starter guide to What Is a 529 Plan?
There is also a specific order of operations to save for college that we recommend families follow. These programs are specific to the State of California. Each state has different rules when it comes to 529 plan savings.
Average Cost Of College In California
When saving for college in California, it's important to take into consideration the cost of attendance in the state. If you choose to go to an out-of-state school, you need to look at the average cost of attendance in that state.
There are 758 colleges and universities in the State of California.
The total average cost of college (Cost of Attendance) in California for in-state residents is $18,911 for 2022. This includes tuition, room and board, books and supplies, and other expenses.
For just tuition alone, the average undergraduate tuition for in-state residents is $3,908 for 2022. The cost of tuition in California has been increasing roughly 10% a year for the last several years.
See how this compares to the average cost of college here. Keep in mind the average student loan debt by graduating class here.
Explore the data here.
California 529 Plan Tax Information
Tax savings is one of the big benefits of using a 529 plan to save for college. On a federal-level, there is no tax savings for contributions, but qualified distributions are tax-free.
Here are the special tax benefits and considerations for using a 529 plan in California.
Contributions
California does not offer any tax deductions for contributing to a 529 plan.
Minimum: There is no minimum contribution.
Maximum: Accepts contributions until all account balances for the same beneficiary reach $529,000.
Matching Contribution: California does offer a small matching contribution called CalKIDS. Newborns born after July 1, 2022 can receive $100 for their college fund. Low-income students can earn an additional $1,500 over their time in school.
Rollovers
California follows federal law for tax treatment of rollovers.
Qualified Distributions
Qualified distributions from a California and non-California 529 plan are tax-free.
K-12 Education
California does not conform with Federal law in regards to using a 529 plan for K-12 tuition. See this guide: Using a 529 Plan For Elementary and High School Private Education.
Student Loans
California does not conform with Federal law for using a 529 plan for student loans.
Non-Qualified Distributions Taxes, Penalties, Recapture
A non-qualified withdrawal from a California 529 plan is subject to an additional 2.5% California penalty tax on the earnings portion, but only if subject to the the additional 10% federal additional penalty tax.
California 529 College Savings Plan Options
California has one 529 plan option - ScholarShare.
ScholarShare 529
The ScholarShare 529 is the name of California's 529 Plan. This plan offers a variety of investment options, including age-based portfolios that become more conservative as the child approaches college, and static investment fund options.
The funds offered include T. Rowe Price and TIAA.
Fees:
There is a program management fee of 0.01% to 0.06% (depending on investment choices).
The underlying funds all charge expense ratios from 0.05% to 0.46% depending on the investment option.
Who Should Use It:
We recommend that first-time Californians open a ScholarShare 529 if they qualify for the matching contribution. You can also link it up to a service like Backer to make it easier to put money in.
Out-of-state residents would find better options elsewhere.
California 529 Able Plan Options
529A Able accounts are accounts designed to help those with disabilities escape poverty and save for themselves. Learn more about 529A Able Plans here.
CalABLE
The CalABLE is a 529A plan open to all residents in California.
This plan allows contributions of up to $16,000 per year from all sources.
It does have a minimum initial contribution amount of $25 per account. The minimum subsequent contribution amount is $25.
The plan does have an account maintenance fee of $37 annually, assessed monthly from the investment portfolio. It also has a program management fee of 0.44%.
You can open an CalABLE plan here.
Other Programs To Save For College
A 529 plan is one way to save for college. Remember, we have a full guide on our approach to college savings here - and it helps you find other options.
If you're looking for ways to boost your college savings, check this out:
Backer
Backer is one of our favorite ways to save for college because they make gifting for college so easy. You can setup an account, link your 529 plan (in most states), and get a unique URL that you can share with friends and family to save for your children's college.
Plus, they have Backer Bucks, which allow you to earn rewards and rebates for the shopping you already do - directly deposited into your children's 529 plan.
Upromise
Upromise is another awesome tool to help you save for college because they have a lot of ways that you can earn money for your 529 plan. You can get rebates and rewards, and you can get cash back into your child's 529 plan by using the Upromise credit card.
California Financial Aid
Using a 529 plan isn't the only way to save money for college. Each state typically offers a variety of financial aid programs for their residents. These include scholarships and grants, and sometimes unique forgivable student loan opportunities.
Check out the list of California Student Loan and Financial Aid Programs.
Return to the full list of 529 Plans By State.