AB 340 Allows 529 Account Holders to Use Funds Sans Tax

According to the Federal Reserve Bank of New York, national student loan debt has reached $1.7 trillion, with California being home to 3.8 million of the nation’s 45 million borrowers, the highest number of any state, according to the Federal Student Aid. The Institute for College Access & Success also estimates that the average class of 2019 college graduate in California owes about $21,485 in student loans.

With the recent passing of Assembly Bill 340, ScholarShare 529 account holders can now use 529 college savings accounts to cover registered apprenticeship program expenses and make payments toward student loan debt. AB 340 conforms the state’s current 529 college savings plan statute to the provisions of the federal Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The federal SECURE act allows for the use of 529 college savings account monies to pay for registered apprenticeship program expenses and student loan repayment without incurring any federal taxes. Now, AB 340 allows 529 account holders to use funds for the same purposes without any California state tax implications.

The bill was authored by Assemblymember Chris M. Ward and sponsored by State Treasurer Fiona Ma.

“I am thrilled that AB 340 was signed into law as it gives families more options and more peace of mind when considering how to pay for higher education costs,” said Ma, chair of the ScholarShare Investment Board. “The traditional college track should not be one size fits all.”

ScholarShare 529 serves as California’s official college savings plan.