California families are facing increasing challenges paying for college. Student loan debt has now reached $1.5 trillion nationally, up from $676 billion in 2008. On the individual level, the average student loan debt for the class of 2017 was $39,400 per student, up 6% from the previous year, according to Student Loan Hero, which provides students with tips, tools, and calculators for paying off student loans.
With the cost of higher education on the rise, families need a solid plan for paying for college. In the past decade, tuition rates at the University of California, California State University and California Community College have increased by 77%, 88%, and 130%, respectively.
It’s not just students who need to plan well for college costs. Many parents (your employees) report tapping their retirement savings and/or going into debt to help pay for their children’s higher education. Recent studies also indicate that California will fall short about 1.1 million college graduates by 2030 if current trends persist, leading to a potential skills gap in the workforce.
Making college more accessible to all Californians—regardless of income—is imperative if we want to improve California’s fiscal health and close the workforce skills gap.
Employers to the Rescue
The good news is more California companies are offering 529 college savings plans as a new corporate perk (financial wellness) to employees. More than 900 California employers—including 32 of the state’s largest employers1 and 18 of America’s best employers2 —offer the state’s ScholarShare 529 college savings plans to their employees. Many of the state’s tech giants, startups and healthcare providers are among the growing list of employers offering the state’s 529 plan.
It's Easy to be the Hero
Employers can step in and be the hero—by offering a 529 workplace savings program, which costs the company nothing and typically requires very little effort to implement and maintain. This small gesture from the employer generates a real payoff for employees: 529 college savings plans are potentially worth thousands of dollars to employees through 100% tax-free growth, which can potentially translate to significantly more money for higher education. In addition to the tax benefits, ScholarShare 529 has a strong track record of investment returns and competitive fees. This helps employees potentially earn higher investment returns—and keep more of those returns—than they would by investing in a lower-performing, higher-fee 529 college savings plan.
Offering a 529 workplace savings program is an opportunity for California employers to make a real impact on their employees’ quality of life, enhance their ability to attract great talent and begin to plant the seeds of future economic growth. Financial wellness programs are critical in addressing college affordability for your employees—and for the next generation.
Julio Martinez is the executive director of the ScholarShare Investment Board. ScholarShare 529 is the official college savings plan of California.
About ScholarShare 529
ScholarShare 529 serves as California’s official college savings plan. Administered by the ScholarShare Investment Board, ScholarShare 529 provides families with a valuable tool that offers a diverse set of investment options, tax-deferred growth, and withdrawals free from state and federal taxes when used for qualified higher education expenses, such as tuition and fees, books, certain room and board costs, computer equipment, and other required supplies. Nearly $9 billion across almost 310,000 accounts is invested in the ScholarShare 529 plan, as of June 30, 2018.
To learn how you can offer a college workplace savings program to your employees, visit www.ScholarShare529.com/employer.
1 Among 100 largest employers, derived from state of California employment development department data
2 Forbes America’s Best Employers (2018)