The California Legislature passed a bill to help students and their parents deal, in a small way, with the high cost of higher education, be it college or apprenticeship-based programs.

The help comes from Assembly Bill 340 authored by Christopher Ward, (D, San Diego) and sponsored by State Treasurer Fiona Ma, to expand use of 529 college savings plans to cover some apprenticeship costs and/or student loan debt, up to $10,000 tax free.

This important piece of legislation sponsored by Treasurer Ma will modernize how funds in a 529 college savings account can be utilized to help families pay for future higher education expenses. While many families have savings in 529 programs, this new law lets them set aside tax free savings for incidental expenses related to apprenticeship programs.

The legislation conforms state law to the provisions of the federal Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 that allow for the use of 529 college savings account monies to pay for qualified apprenticeship expenses and repay up to $10,000 in student loan debt per beneficiary and siblings. Now 529 account holders in California can utilize these funds for these purposes without fear of having their earnings taxed and penalized by the state.

“As Chair of the ScholarShare Investment Board, it is a top priority of mine to help families save for higher education and mitigate against the growing student loan debt crisis that has worsened in recent years,” Ma said in announcing the program.

Existing federal law, the Further Consolidated Appropriations Act, 2020, expanded the definition of “qualified higher education expenses” to include expenses associated with registered apprenticeship programs and payment on the principal or interest of a qualified education loan. The act also made coordinating changes related to the deduction of interest paid on a qualified education loan.

This bill would, for taxable years beginning on or after January 1, 2021, conform state tax law to those changes relating to qualified higher education expenses made by the act. 

Presently, national student loan debt has reached $1.6 trillion. California is home to 3.8 million of the nation’s 45 million borrowers, the highest number of any state. The average Class of 2019 college graduate in California owes about $21,485 in student loans. AB 340 gives families greater flexibility with their 529 savings by ensuring their children have access to whichever type of qualified higher education best fits their unique professional aspirations.

To learn more about ScholarShare 529, visit

By Ray Baca, Executive Director Email: [email protected]