SACRAMENTO – Today is National 529 College Savings Plan Day and Senator Ted Gaines (R-El Dorado) is highlighting his Senate Bill 1218, legislation that will help families save money for college by making contributions to 529 plans tax deductible in California.
“The cost to send kids to college has skyrocketed over the past several decades. Students who work, receive scholarships and/or financial aid, and get help from their parents still manage to graduate with tens of thousands of dollars racked up in student loans,” said Senator Gaines. “My hope is that by allowing the ability to deduct 529 contributions, it will increase savings and decrease the amount needed in student loans.”
According to a new survey by the investment firm Edward Jones, only 29 percent of Americans even know that 529 plans are an education savings tool.
A 529 savings plan is an investment account meant for college tuition and other higher-education costs. The plans are usually sponsored by states and offer various benefits. Many states give the account owner full or partial state income tax deductions for their contributions to the state’s 529 plans. California is currently one of only nine states that do not offer a state income tax deduction or tax credit for contributions to the state's 529 college savings plan.
Senate Bill 1218 will make contributions to 529 plans of up to $3,000 per individual filer and $6,000 per joint filers tax deductible each year in California.
For reference, tuition and related costs (books, living expenses, etc.) at both the University of California and California State University systems have tripled over the last 15 years. The average cost for one year at a California State University is approximately $25,000. The average cost for one year at a University of California is nearly $35,000.
To attend the private University of Southern California, tuition alone will cost more than $50,000 per year. Data from The Institute for College Access & Success shows that the average borrower from California has $22,191 worth of student loan debt that still needs to be paid.