California Gov. Gavin Newsom signed into law SB 898, a bill that protects college savings accounts from money judgments by creditors.
The bill was authored by state Sen. Bob Wieckowski, D-Fremont and is sponsored by Fiona Ma, state treasurer and chair of the ScholarShare Investment Board. The bill was approved by Newsom on Sept. 11.
“Saving for your child’s college education is difficult enough under normal conditions, but with the economic collapse induced by the pandemic, it is especially tough for families today,” Wieckowski said in a press release.
ScholarShare 529 accounts — the college savings accounts protected by the bill — were created in 1999 to provide families with relief from state and federal taxes when used for some higher education expenses, such as tuition and fees, books, computer equipment and other necessary supplies.
“A ScholarShare 529 account can put students on the path toward a college degree by helping them pay for the skyrocketing costs of college,” Ma said in the press release. “Parents, grandparents, and other relatives of young people can help their student by opening an account and contributing today.”
Currently, a creditor is allowed to use a ScholarShare 529 account to satisfy an account holder’s judgment, meaning it can be seized to pay back debt. This can be “devastating” especially because others, including friends and family, may have contributed money to the account for the student beneficiary, not just the person filing for bankruptcy, the press release states.
SB 898 adds college savings to the list of exemptions under California bankruptcy law, so ScholarShare 529 accounts may no longer be taken to satisfy judgments.
“We need more college graduates joining our workforce in the future and this bill will keep students on the path to higher education,” Wieckowski said in the press release. “I applaud the Governor for signing this important bill.”