What are qualified higher education expenses?
Qualified higher education expenses include tuition, mandatory fees, books, supplies, and equipment required for the enrollment and attendance of the Beneficiary at an eligible educational institution, and certain room and board expenses. Qualified Higher Education Expenses also include certain additional enrollment and attendant costs of a beneficiary who is a special needs beneficiary in connection with the Beneficiary's enrollment or attendance at an eligible institution. For this purpose, eligible educational institutions generally are accredited postsecondary educational institutions offering credit toward a technical certificate, an associate's degree, bachelor's degree, a graduate-level degree or professional degree, or another recognized postsecondary credential.
Do I have to use my account at a Georgia college or university?
No. The money in your account may be used at any eligible educational institution. This includes accredited public and private colleges and universities, graduate and post-graduate schools, community colleges, and certain proprietary and vocational schools.
Can I use the money at schools outside the US?
Yes, 529 Plan assets can be used at some accredited foreign schools. Contact your school to determine if it qualifies as an eligible educational institution.
What if my child decides not to attend college?
If the beneficiary of an account does not attend college, the account owner may name another beneficiary for the account who must be a certain member of the family of the beneficiary that is being replaced. If the funds are withdrawn for a purpose other than to pay for qualified higher education expenses (except on account of a beneficiary's death or disability) or they are treated as withdrawn (for example if an ineligible beneficiary is named) there will be a 10% additional federal tax on the earnings of the account owner's tax rate. Please note, effective March 10, 2008, transfers from the Guaranteed Option to the Money Market Option will not be permitted. (If this restriction changes, investors will be notified prior to the effective date of any such change.)
For Georgia tax purposes, a non-qualified withdrawal will result in income taxation on the earnings portion of the distribution and, to the extent that the account owner has previously taken a Georgia income tax deduction for contributions to the account, the contributions portion of the distribution ("recapture"). However, if an account owner has also made contributions to the account that were not deducted, the contributions portion of a non-qualified withdrawal does not have to be included in taxable income until the account owner has withdrawn all of the contributions that were not deducted. Use the Withdrawal Request form (PDF, 76KB).
What is a non-qualified withdrawal?
Generally, if you withdraw funds from your account for a purpose other than to pay for qualified higher education expenses of the beneficiary, you must pay federal and Georgia income tax at the account owner's tax rate on the earnings portion of the withdrawal. In addition to this income tax, federal law requires that you pay an additional 10% tax on the earnings portion of the withdrawal. The additional 10% federal tax is waived if the withdrawal is due to the beneficiary's death or disability, or if the withdrawal is equal to a scholarship received by the beneficiary.
For Georgia tax purposes, a non-qualified withdrawal will result in income taxation on the earnings portion of the distribution and, to the extent that the account owner has previously taken a Georgia income tax deduction for contributions to the account, the contributions portion of the distribution ("recapture"). However, if an account owner has also made contributions to the account that were not deducted, the contributions portion of a non-qualified withdrawal does not have to be included in taxable income until the account owner has withdrawn all of the contributions that were not deducted. Use the Withdrawal Request form (PDF, 76KB).
What happens in the event of death or disability of the beneficiary?
If the distribution is made due to the death or disability of the beneficiary, the earnings portion of such a withdrawal is subject to federal income tax but is not subject to a 10% additional federal tax.
Will participation in the Path2College 529 Plan affect my beneficiary's eligibility for financial aid?
The treatment of investments in a 529 savings plan varies by school. Assets are typically treated as the account holder's and not the student's. Any investments, including those in 529 accounts, may affect the student's eligibility to get financial aid based on need. You should check with the schools you are considering regarding this issue.
What if my child gets a full or partial scholarship?
If the beneficiary receives a scholarship that covers the cost of qualified expenses, you can withdraw the funds from your account up to the amount of the scholarship without penalty or additional tax. The earnings portion of the amount withdrawn will be subject to the additional federal tax of 10% to the extent the amount withdrawn exceeds the amount of the scholarship.
Is paying off a student loan a qualified higher education expense?
No. Repayment of student loans is not considered a qualified higher education expense.
How do I know which educational institutions are eligible?
Contact your school to determine if it qualifies as an eligible educational institution.
What room and board expenses are covered?
The cost of room and board may be treated as qualified higher education expenses only if it is incurred during an academic period during which the Beneficiary is enrolled or accepted for enrollment in a degree, certificate, or other program which leads to a recognized educational credential awarded by an eligible educational institution, and during which the Beneficiary is enrolled at least half-time. (Half-time is defined as half of a full-time academic workload for the course of study the student is pursuing based on the standard at the Beneficiary?s eligible educational institution.) The amount of room and board expenses that may be treated as a qualified higher education expense is generally limited to the room and board allowance applicable to the student that is included by the eligible educational institution in its ?cost of attendance? for purposes of determining eligibility for federal education assistance for that year.
For students living in housing owned or operated by the eligible educational institution, if the actual invoice amount charged by the eligible educational institution for room and board is higher than the ?cost of attendance? figure, then the actual invoice amount may be treated as qualified room and board costs.
Can a Hope Scholarship Credit or Lifetime Learning Credit for qualified tuition and other related expenses still be taken?
A student or the student's parent may claim a Hope Scholarship Credit or Lifetime Learning Credit for certain qualified education expenses, provided that eligibility requirements for the credit are met. However, you cannot claim a credit based on the same expenses used to figure the tax-free portion of a distribution from a 529 plan. You should consult the current version of IRS Publication 970, Tax Benefits for Education, for information about other tax incentives availablef or educational expenses.
How do I take distributions to pay for college?
When you want to withdraw money (take a distribution) from your account, fill out the Withdrawal Request Form (PDF, 76KB) and return it to us. This form can be used for withdrawals for qualified higher education expenses of your beneficiary, non-qualified withdrawals, or withdrawals due to death, disability or scholarship. Note: Non-qualified withdrawals will be subject to federal income taxes and a 10% additional federal tax. Be sure to keep your receipts.
If I move out of state, what will happen to my account?
If you move to another state, you can still keep your money invested in the account. You can also continue contributing money to your account. Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.
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