California is giving kids free money for college. Here’s what families need to know

California is getting ready to open a small college savings account for every child born in the state on or after July 1, 2022, and a much larger one for all low-income children who were enrolled in a California public school in grades 1 through 12. last year or this year.

The state-funded program, nicknamed CalKids, advertises that it will provide “up to $100” for newborns and “up to $1,500” for low-income students, but parents of newborns will have to jump through some hoops to get the full $100 and very few school-age students will qualify for the full $1,500.

“Research has shown that having an investment or savings dedicated for college can have a positive effect on the expectations of the child and parents,” said Julio Martinez, executive director of the Scholarshare Investment Board, which is managing CalKids.

At the end of 2021, there were 123 programs nationwide that opened long-term savings accounts for children, usually at birth or in kindergarten and usually for college, according to Prosperity Now, a nonprofit advancing racial economic equity. These “Child Savings Account” programs are typically sponsored by cities (including San Francisco and Oakland), states and nonprofit organizations.

California’s will be the largest by far, both in the number and size of accounts.

It will enroll about 3.4 million school-age children at the beginning, plus an estimated 450,000 newborns annually. That’s more than the 1.2 million children enrolled in all the other 123 programs combined at the end of the year, said Shira Markoff, a policy fellow at Prosperity Now.

The next-largest statewide program, Pennsylvania’s, contributes an initial $100 for newborns. The most generous, Maine’s, provides $500 for each newborn. San Francisco’s Kindergarten to College program started when Gov. Gavin Newsom was the city’s mayor. It opens a Citibank savings bank account seeded with $50 for every kindergartner in the city’s public schools.

California’s program has been in the works since 2019, when a bill authorized CalKids accounts for low-income newborns born on or after July 1, 2020. But implementation was delayed because of the pandemic and two subsequent bills that vastly expanded the program.

The ScholarShare Investment Board, housed in the California Treasurer’s Office, will manage CalKids. The board also administers ScholarShare, the state’s voluntary 529 college savings plan. The Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, a for-profit company that manages ScholarShare, will also do investment management and marketing for CalKids.

The funds will be held in an “omnibus” or single account owned by the state, with a sub-account designated for each child. Families can watch their child’s seed money grow, but can’t withdraw it, use it for other purposes or transfer it to someone else.

When the child enters a four-year or community college or technical/vocational program, the state will send that child’s money directly to his or her school for education expenses. The money won’t be taxable to the parent or child. If it’s not used for college before age 26, the money stays in the fund for others to use.

Students greet their friends before gathering for the morning drum circle at Howard Elementary School in Oakland last August.

Jessica Christian/The Chronicle 2021

Parents or other family members can open a separate 529 account on behalf of a child, and the state hopes the new program will encourage more parents to open one with ScholarShare. Although parents can link a CalKids account with an individual ScholarShare account for viewing purposes, the two accounts have different rules (parents have much more control over their own 529 plans) and can never be mixed.

The state allocated $1.9 billion in last year’s budget to make deposits for low-income students enrolled in first through 12th grade in 2021-22. This year’s budget included $170 million for children entering first grade in 2022-23. The state is spending about $15.3 million a year for newborn accounts.

Making sure parents know about CalKids, and don’t fall prey to impostors posing as the program to solicit personal information, will be a big undertaking. Each eligible student will receive at least one notice by mail and by email, if an email address is available. To get the word out, “we want to partner with credible sources” such as universities, nonprofits, financial institutions and school superintendents, Martinez said.

Here are some FAQs about the plan, officially called California Kids Investment and Development Savings Program.

Who is eligible for CalKids?

The state will open an account for any child born on or after July 1, 2022, regardless of income or where the child eventually attends school. “We get data from the Department of Public Health no later than 90 days after their birth is registered. Once we get the data, the accounts will be created” and parents will be notified, Martinez said.

To qualify for a low-income school-age account, a student must meet at least one criterion under the Local Control Funding Formula. In general, students should qualify if they are receiving the national school lunch program, CalFresh or CalWorks, or are foster youth, homeless, migrant students or English learners.

The California Department of Education will provide CalKids with information on each eligible student based on a census taken in October. “The roster (of eligible students) won’t become available until April of next year, that’s when the accounts will be set up,” Martinez said.

All accounts will be opened regardless of immigration status.

How can a parent see the CalKids account?

To view the account, the parent must register at CalKids.org and provide the child’s birthdate and the county where the child was born or attends school.

For newborns, they must also enter either the Local Registration Number found on the birth certificate or the code provided on the notification letter.

For school-age students, they must provide the student’s statewide student identification number or the code sent on the notification letter. The child’s school or school district can provide the SSID.

The program will not send out statements.

How much will the state contribute to each CalKids account?

For newborns, the state will deposit $25. It will add another $25 when the parent registers the account and another $50 if the parent links it to a new or existing ScholarShare account.

For low-income students, the state will automatically deposit $500, plus $500 if they are foster youth, plus $500 if they are homeless. To get the full $1,500, a student would have to be a low-income, homeless foster youth. The state has identified 1,253 such students, Martinez said.

Will the state make additional deposits after the initial one?

No. It’s a one-time grant. State funds will be allocated each year to cover children born that year and incoming low-income first graders, as long as the state continues to make appropriations.

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