SACRAMENTO – With strong bipartisan support, today the California State Senate approved a bill by Senator Bob Wieckowski (D-Fremont) to protect Golden State Scholarshare 529 college savings plans from being seized by creditors in bankruptcy cases.
“Families across our state our facing economic hardship from the COVID-19 emergency and Senate Bill 898 will ensure that all the funds they have saved up for their children’s college education cannot be touched by creditors should they have to file for bankruptcy,” said Senator Wieckowski, a member of the Senate’s Judiciary Committee. “Students seeking to better themselves through higher education should not be held responsible for their parents’ financial difficulties. College is expensive enough. This bill will add security and improve access to college for Scholarshare 529 participants.”
California created the Scholarshare 529 college savings accounts in 1999 to help families of all income levels prepare and save for future higher education expenses. Children with savings accounts, however small, are far more likely to enroll and graduate from college.
But unlike retirement plans, 529 accounts are not protected from creditor claims in California. A creditor can attach the account to satisfy a judgment, which can be devastating to a family and reduce access to college. A majority of states have state creditor protection.
State Treasurer Fiona Ma, who oversees the program, is the sponsor of SB 898 and spoke in support of the legislation when the bill was heard in the Judiciary Committee, saying in times like these “we need to protect the next generation and give them every opportunity to succeed.”
The national student load debt is currently more than $1.6 trillion, substantially more than auto or credit card debt. Without the benefit of a Scholarshare 529 college savings plan, students would be more heavily reliant on college loans.
SB 898 is also supported by the California Low Income Consumer Coalition, Housing and Economic Rights Advocates and Consumer Action.
The bill now goes to the state Assembly for its consideration.
Senator Wieckowski represents the 10th District, which includes parts of Alameda and Santa Clara counties.