Prepaid College Trust Account Holder FAQs

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Payments / Tuition Benefits / Tax Benefits

Account Termination, Transfer, and RefundAccount Changes

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Payments on your Account:

 
Q: How can I make payments?
The Prepaid College Trust has five payment options:

1. Lump Sum Payment. A one-time payment that covers the full amount of the Contract.
2. Annual Payment. Equal yearly payments for a designated number of years.
3. Five-Year Monthly Payment. 60 equal monthly payments.
4. Extended Monthly Payment. A designated number of equal monthly payments typically made through July of the Beneficiary’s projected year of high school graduation or year of Initial Eligibility.
5. Down Payment Option. A down payment of 25%, 40%, or 55% of the lump sum amount. The remaining amount is paid in a designated number of equal monthly or annual payments.

Account Holders may change the payment option at any time upon written request to the Board, subject to any administrative fees determined by the Board. In the event you are due a refund for overpayment on this Contract, the Board will refund any overpayment. The Board will not, however, refund any earnings on such an overpayment. See Article VII – Termination, Transfer and Refund.

Q: Can I rollover funds from another 529 plan?
You can transfer assets for the same Beneficiary from another Qualified Tuition Program to the Prepaid College Trust. Rollovers for the same Beneficiary are restricted to one every 12 months. The Account Holder and/or the previous Qualified Tuition Program must provide the Prepaid College Trust with an accurate allocation of principal and earnings on the previous account for application to the new Account. To roll over assets for the same Beneficiary into an existing Account in the Prepaid College Trust, you must complete a Rollover Form. If you wish to rollover funds into a new Account, you must also complete an Enrollment Form.

Q: What happens if I miss a payment?
The Board reserves the right to terminate an Account for missed payments based on the following schedule:
Failure to Make First Payment. If no payment is received within 60 days of the first payment due date of the Contract, the Account Holder will be in default and deemed delinquent. If no payment is received within 90 days of the first payment due date of this Contract, the Account will be canceled and can only be reinstated at the Account Holder’s request with full payment, subject to Board approval.
Missed Payments. If any payment(s) has been made but subsequent payments are missed, the Account will be in default after 30 days of nonpayment and will be deemed delinquent. If no payment has been received within 180 days of the last payment, the Account Holder will receive a warning letter. If no payment is received within 210 days of the last payment, the Account will be canceled and can only be reinstated at the Account Holder’s request with full payment, subject to Board approval.
Unpaid Payments and Fees. All payments due, assessed late fees, and/or administrative fees must be paid prior to the use of Benefits.

Q: Can I accelerate my payments or pay off my Account early?
Yes. Account Holders may:

1) Pay more than the monthly or annual payment amount. This may lessen the number of monthly or annual payments that will have to be made, but it will not reduce the total payment amount.

2) Reduce the total payment amount by making a single payment of at least 25% of the payoff amount.

An Account may also be paid in full at any time. To request a payoff amount, the Account Holder may either send an email request to: accounts@collegesavingsmd.org or call our toll-free number, 1-888-4MD-GRAD (463-4723), to speak with a representative. The Account Holder may also access the Account online to obtain a payoff amount. If the payoff amount is obtained online, please include a printed copy of the page which shows the payoff amount with your check. All payoffs should be mailed to: MPCT, 217 E. Redwood Street, Suite 1350, Baltimore, MD 21202. Please include your account number and the words "payoff" on your check.

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Tuition Benefit Payments to Eligible Institutions


Q: What are my Tuition Benefits?
Benefits must be used to pay for a normal full-time (or half-time, as described below) course load for the number of semesters or years of undergraduate education specified in the tuition plan purchased under the Contract. An Account Holder can start using Benefits beginning with each fall semester of the projected enrollment year(s) or year of initial eligibility that was purchased, as identified on the Certificate of Tuition Benefits.

If the Beneficiary attends a Maryland 4-year public college as a full-time student, the Prepaid College Trust will pay the full in-state Tuition. If the Beneficiary attends a 2-year Maryland Community College, the Prepaid College Trust will pay the full in-county Tuition. If the Beneficiary attends an Eligible Institution (as defined in Article II – Definitions) that is private or out-of-state as a full-time student, the Prepaid College Trust will pay no more than one half of the Weighted Average Tuition of the Maryland Public Colleges in the tuition plan purchased towards each semester or the actual Tuition, whichever is less. If the Beneficiary receives a Scholarship, grant, or tuition remission, the Prepaid College Trust will pay any remaining Tuition up to the scheduled Benefit.

Q: When may I use my Tuition Benefits?
Benefits may be used beginning with the fall semester of the projected enrollment year (or year of initial eligibility) that was purchased, as identified on the Certificate of Tuition Benefits. The Account must be in effect for at least three years before Benefits will be paid.

Q: What is the Weighted Average Tuition and how much is it?
The Weighted Average Tuition is calculated, first, by multiplying the in-state or in-county Tuition at each Maryland public college by the number of full-time equivalent in-state or in-county students enrolled at that college, added together. This total is then divided by the number of full-time equivalent in-state or in-county students enrolled at all Maryland public colleges. There is a separate calculation for the 4-year public colleges and the 2-year public community colleges in Maryland. The Board calculates the Weighted Average Tuition once each year, typically in the Fall, for the following year by applying its projected increase for tuition and mandatory fees to the current year's Weighted Average Tuition.

The Weighted Average Tuitions for the 2011 - 2012 Academic Year are listed below. 

 

 Weighted Average Tuition =

 Tuition +

 Mandatory Fees

4 Year Public Colleges 

$8,355

$6,228

$2,127

Community Colleges 

$3,859

$3,179

$680


Q. How can I view the in-state tuition and mandatory fees at a particular Maryland public 4-year college?
Tuition and mandatory fees for institutions within the University System of Maryland can be viewed on its web site using the link below:

http://www.usmd.edu/usm/adminfinance/budget/tuitfees.html

For Morgan State University or St. Mary’s College of Maryland, which are not part of the University System of Maryland, please visit the web site of the institution.

Q: How long does a student have to begin to use Benefits?
A student has up to 10 years after his/her projected year of high school graduation to begin to use Benefits. In addition, any years spent in active U.S. military service are added to the 10-year limit.

Q: What are my options if my child receives a scholarship, grant, or tuition remission?
Unused Benefits may occur if the Beneficiary receives a Scholarship, grant, or tuition remission or graduates early from college. You may apply Unused Benefits to pay other Qualified Higher Education Expenses (as defined in Article II – Definitions). When Unused Benefits are used to pay Qualified Higher Education Expenses, the Prepaid College Trust will pay the amount it would have otherwise paid the Eligible Institution or the actual cost of the Qualified Higher Education Expenses, whichever is less. Unused Benefits are always available for a refund or reduced refund in accordance with Article VII of the Contract. Additionally, Unused Benefits are not subject to the requirement that a Beneficiary be enrolled at least half-time.

Q: What are my maximum Tuition Benefits?
The Prepaid College Trust will not pay for more than 15 credit hours for each semester (or the financial equivalent). Under no circumstances will the Prepaid College Trust pay for more than two mandatory fees (or the equivalent) for each year of Benefits purchased for a Beneficiary. The Prepaid College Trust will never pay more than the actual in-state or in-county Tuition or more than the cost of other Qualified Higher Education Expenses. If Tuition or other Qualified Higher Education Expenses are more than the Benefits paid by the Prepaid College Trust, you are or your Beneficiary is responsible for the difference.

Q: What are my minimum Tuition Benefits?
Minimum Benefits are defined as payments you make under the Contract plus a reasonable rate of return. This monthly rate of return is equal to the rate of return of a U.S. Government Security with a constant maturity of one year minus 1.2%, but will never be less than zero. Notwithstanding any other provisions of the Contract, in the event that Tuition at an Eligible Institution is less than the Minimum Benefit, you may use the difference to pay for other Qualified Higher Education Expenses such as room and board and books. Minimum Benefits are calculated each October. Account Holders who are eligible for Minimum Benefits will then be notified in writing of the amount of their Minimum Benefit and their options for claiming this Benefit.

Q: I purchased a University Plan, but my beneficiary has decided to attend a community college. Can my account be converted?
Prior to using any Benefits, you may convert a Contract from one tuition plan to another (i.e. a Community College Plan to University Plan and vice versa) upon written request to the Board and upon payment of any required fees. As a result of the conversion, the Board will revalue the Contract, and you may be required to make additional payments, you may receive a reduced refund, or your payments may be reduced.

Q: My child will enter college next fall. How can I claim tuition benefits on my account?
In June (for the fall semester) and again in November (for the spring semester), the Prepaid College Trust will mail a Benefits Claim Form to Account Holders who are eligible to use tuition Benefits. This form should be completed, signed by the Account Holder, and returned to the Prepaid College Trust’s office with any required documentation.
Alternatively, you may download the Benefits Claim Form from our website. If you have further questions, you may contact our office via email at benefits@collegesavingsmd.org or call us at 1-888-4MD-GRAD (463-4723) and select option #1, then option #2.

For additional Information on claiming tuition benefits, please click here.

Q: What happens if my beneficiary attends college as a half-time undergraduate student?
In order to receive Benefits, other than Unused Benefits, your Beneficiary must be enrolled at least half-time. Half-time is defined as at least one-half of the minimum number of credits necessary to be considered a full-time student by the Eligible Institution. If your Beneficiary attends a Maryland Public College, the Prepaid College Trust will pay one-half of the in-state or in-county Tuition for a full-time student or the actual Tuition charged by the Eligible Institution to the student, whichever is less.

If a student attends an Eligible Institution that is private or out of state, the Prepaid College Trust will pay one-half of the Benefit for a full-time student per semester or the actual Tuition charged by the Eligible Institution to the student, whichever is less. If the Prepaid College Trust’s payment does not cover the entire Tuition cost to the student, the Prepaid College Trust is not responsible for the difference.

Q: Can I use my Tuition Benefits towards summer courses?
Yes, if you have delayed using tuition Benefits in a prior semester or if your Account has Unused Benefits (which could result from the receipt of a scholarship, for example).

Q: How can I verify when the Prepaid College Trust has mailed my Tuition Benefits to a college?
You may confirm that the Prepaid College Trust mailed your payment to the college by accessing your account online at our website and viewing the section on Distributions. In addition, a letter is mailed to the Account Holder at his/her address of record that confirms the payment.

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Tax Benefits


Q: How does the State income deduction work for the Prepaid College Trust?
Maryland taxpayers receive a maximum annual income deduction of $2,500 per Account on their Maryland tax return. The Account Holder may take any amount disallowed in one year as an income deduction in succeeding taxable years until the full amount contributed to the Account has been deducted, subject to the $2,500 annual limit. Although individuals other than the Account Holder may make contributions to an Account, only an Account Holder may take the annual income deduction and only on amounts contributed by the Account Holder. Please note that your Account statements are not tax documents and should not be submitted with your tax forms. For additional information on Prepaid College Trust tax benefits for Maryland taxpayers, please refer to Maryland Income Tax Administrative Release No. 32, which can be obtained at www.marylandtaxes.com or by calling 1-800-MD-TAXES.

To take advantage of this income deduction for 2011, you may:


- Contribute electronically by logging into your account on our web site. If you have already added bank information to the account, you may contribute online by December 31, 2011 to be eligible for the Maryland income deduction. If bank information has not yet been added to the account, it must be added no later than December 15, 2011 in order for it to be activated in time to electronically contribute by December 31, 2011.
- Contribute via a check made payable to the Maryland Prepaid College Trust and postmarked by December 31, 2011. Please note that Account Holders are responsible for retaining any documentation needed to confirm the timing of a payment. 

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Account Termination, Transfer, and Refund


Q: How can I close my account and what types of refunds are available?
Refunds for a specific semester(s) or year(s) are only given upon the written request of the Account Holder, with an original signature, under the following circumstances:

Death or Disability of the Beneficiary.
1. Beneficiary Enrolled at Eligible Institution. The refund will be the amount that would have otherwise been paid directly to the Eligible Institution.
2. Beneficiary Not Enrolled at Eligible Institution. If the Beneficiary has finished high school, the refund will be equal to the Weighted Average Tuition within the tuition plan. If the Beneficiary has not yet graduated from high school or the death or Disability of the Beneficiary occurs prior to the year of Initial Eligibility, the refund will be the payments made to date, plus or minus the Prepaid College Trust’s investment return for the time the money is in the Prepaid College Trust.
Scholarship, Grant or Tuition Remission. The refund will be the amount that would have otherwise been paid directly to the Eligible Institution.
Reduced Refund. Reduced refunds are given under all other circumstances. The reduced refunds discussed below include a financial penalty on Investment Earnings in order to maintain the actuarial soundness of the Prepaid College Trust.
A Contract in existence for less than three years as measured from the first payment due date. The reduced refund will equal the actual payments made less any administrative fees, plus or minus 50% of the Investment Earnings or losses on payments, as calculated in this section.
A Contract in existence for three years or more as measured from the first payment due date. The reduced refund will equal the actual payments made, less any administrative fees, plus or minus 90% of the Investment Earnings or losses on payments, as calculated in this section.


For all reduced refunds, Investment Earnings or losses on payments will be 50% or 90% of the Prepaid College Trust’s investment return, as applicable, applied against each payment from the time it is made until the time it is refunded. All requests will be processed in a timely and expeditious manner. In order to preserve the financial stability of the Prepaid College Trust, the Board reserves the right to delay a refund for a period of time not to exceed one year.

Q: How can I transfer my account to another 529 plan?
Upon notification in writing to the Board, you may transfer your Account to another program intended to comply with Section 529 of the Internal Revenue Code. All transfers are subject to the Internal Revenue Code. If the Contract is less than 3 years old as measured from the first payment due date, the transferable amount will equal the contributions to the Prepaid College Trust plus or minus 75% of the Investment Earnings or losses realized on the contributions, less any administrative fees or Benefits used. If the Contract is over 3 years old as measured from the first payment due date, the transferable amount will equal the contributions to the Prepaid College Trust plus or minus 100% of the Investment Earnings or losses realized on the contributions, less any administrative fees or Benefits used. 

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Account Changes

Q: Can I set up automatic monthly payments from my checking or savings account? What about setting up payroll deductions?
Payments can be made by check, money order, electronic funds transfer, or payroll deduction. All payments must be made in U.S. dollars; checks must be drawn on U.S. banks. If a payment is made by check, money order, or electronic funds transfer, we reserve the right, subject to applicable law, to restrict distribution of that payment from the Account for up to 10 days after the funds are deposited. Account Holders may change payment methods at any time upon written request to the Board. The Board may also approve other payment methods.

Q: How can I report a change of address?
The Account Holder shall notify the College Savings Plans of Maryland of any change of address of any person listed on the Enrollment Form submitted by the Account Holder. To make an address change, an Account Holder may log onto the Account or complete and submit a “Change of Address Form”.

Q: How can I change my Tuition Plan or Payment Option?
You may change the Tuition Plan or Payment Option that was originally selected by completing and submitting the Change of Tuition Plan/Payment Option Form

Q: How can I change the beneficiary on my account?
You may change the Beneficiary to a Member of the Family of the Beneficiary (as defined in Article II – Definitions) at any time. The Board will then calculate the new payment amount given the change, if any, in projected college enrollment or Initial Eligibility year. As a condition of such Beneficiary change, you are required to pay additional costs that may be necessary. All Beneficiary changes must be requested in writing and include information as determined by the Board. If you have overpaid, you may take a reduced refund as provided in Article VII of the Contract or transfer the overpayment to another Member of the Family of the original Beneficiary. If you change the Beneficiary, all terms and conditions of the Contract continue to apply, even though the original Beneficiary has been changed.

To make a change to your Beneficiary, please complete and submit the Change of Beneficiary Form.

Q: How can I change the Account Holder on my Account?
You may transfer control of the Contract to a new Account Holder unless the Account has been funded with the proceeds from an UGMA/UTMA account. All transfers must be requested in writing and include information as determined by the Board. Your right of control may not be sold, transferred, used as collateral, or pledged or exchanged for money or anything of value. The Board may require affidavits or other evidence to establish that such a transfer is non-financial in nature. Your right of control may also be transferred under an appropriate court order as part of divorce proceedings. If you transfer control of the Contract to a new Account Holder, the new Account Holder must agree to be bound by the terms and conditions of this Contract.

To make a change to the Account Holder, please complete and submit the Change of Account Holder Form

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Other

Q: Can my spouse call your office to obtain information about my account?
To protect your privacy, Account information is generally provided only to the Account Holder or Custodian. However, you may submit a letter signed by the Account Holder to direct that someone other than you may have access to information regarding your Account. This right to information does not entitle your designee to request Benefits under the Contract or take any other action with respect to the Account.

Q: What are the fees associated with the Prepaid College Trust?
The operating expenses of the Prepaid College Trust are covered by 2.5% of Contract payments. In addition, each new Prepaid College Trust Account is charged a $75 Enrollment Fee if mailed or $50 if completed online. If you purchase additional years of Tuition for the same Beneficiary, or open an Account for a Beneficiary for whom you already have a Maryland College Investment Plan account, you pay a reduced Enrollment Fee of $20. We must receive your Enrollment Fee before your Account can be opened. A complete Schedule of Fees can be found on page 7 of our Disclosure Statement.

Q: Is my account protected from creditors?
Under Maryland law, your Account is not subject to attachment, garnishment, or seizure by creditors of you or the Beneficiary. Federal law also provides limited creditor protections based on the timing of the contributions and the debtor’s relationship to the Beneficiary. Generally, contributions made to a debtor’s Account less than one year before the filing of a bankruptcy petition are included in the debtor Account Holder’s bankruptcy estate and are not protected from creditors. Contributions made to a debtor’s Account more than one year before the filing of a bankruptcy petition are generally not part of a debtor Account Holder’s bankruptcy estate, provided that the contributions are not deemed excess contributions and the Beneficiary is the debtor’s child, stepchild, grandchild or step-grandchild. However, for contributions made between one and two years prior to the filing of bankruptcy petition, a maximum of $5,000 in contributions may be excluded from the debtor Account Holder’s bankruptcy estate.
You should consult a legal advisor regarding the application of this specific law to your particular circumstances and for a determination of whether Maryland or federal law applies to your situation.

Q: How does my participation in the Prepaid College Trust affect my ability to receive financial aid?
A Beneficiary may wish to participate in federal, state, or institutional loan, grant, or other programs for funding higher education. An investment in the Prepaid College Trust may or may not have an adverse impact on the Beneficiary’s eligibility to participate in need-based financial aid programs.

Assets in the Prepaid College Trust or another 529 plan are typically included on the Free Application for Federal Student Aid (FAFSA) form as a parental asset, which is assessed at a lower rate than a student’s asset would be when determining a family’s expected contribution. Specifically, Prepaid College Trust Accounts are to be reported on the FAFSA using the Account Value, which is available for all current Accounts by accessing your Account(s) online in the Account Summary section.
Since the treatment of Account assets under any such program may have a material effect on your Beneficiary’s eligibility to receive valuable benefits under financial aid programs, you or your Beneficiary will need to check the applicable laws or regulations or check with the financial aid office of an Eligible Institution and/or your tax advisor regarding the impact of an investment in the Prepaid College Trust on need-based financial aid programs.

Q: What happens if my Beneficiary decides not to attend college?
There are three options to choose from if the Beneficiary decides not to attend college:

Delayed Benefits. Delayed Benefits may occur if an Account Holder elects not to use Benefits for a semester for which he/she would otherwise be eligible for Benefits. Delayed Benefits may also occur under certain circumstances when applying Benefits from a University Plan to Community College Tuition. You may apply Delayed Benefits toward future Tuition. The Prepaid College Trust will pay the amount it would have otherwise paid the Eligible Institution or the actual cost, whichever is less.
Termination.
1. Only the Account Holder can terminate a Contract and receive a refund or reduced refund. The Board will determine the amount of any refund or reduced refund pursuant to the terms of this Contract.
The Account Holder may designate an Account Holder’s Successor to take control of the Account in the event of the Account Holder’s death. The Account Holder may modify or terminate a Contract or, upon written notice, request a refund or reduced refund without the consent or authorization of the Account Holder’s Successor or the Beneficiary. In the event the Account Holder is due a refund for overpayment on a Contract, the Board will refund any overpayment. The Board will not, however, refund any earnings on such an overpayment. The value of an Account will be calculated only on dates on which the New York Stock Exchange is open for business.

2. This Contract will terminate 10 years after the Beneficiary’s year of projected enrollment/Initial Eligibility plus the number of years purchased in the Contract(s). This time can be extended for any active service in the U.S. military. The Account Holder may request a waiver to extend the time period allowed to use Benefits. Any waiver request will be subject to the approval of the Board, in its sole discretion. If time has expired on a Contract, Benefits remain in the Account, and no waiver has been made, the Contract will be terminated. Upon termination, you can no longer claim Benefits under the Contract. The unclaimed Benefits will remain with the Prepaid College Trust. The Prepaid College Trust will retain any earnings obtained after the Contract has been terminated.

3. If (a) the Account Holder fails to make the required payments or supply necessary information, (b) the maximum period in which Benefits can be used has expired, or (c) it is determined that either you or the Beneficiary has made any material misrepresentation related to the Contract, the Board in its sole discretion may terminate the Contract.

Q: Does the Prepaid College Trust send me an Account Statement?
The Prepaid College Trust sends an Annual Statement of Account for each Account during the first quarter of the year. The Account statement will show payments made on the Account and any Benefits that have been distributed from the Account. At any time, however, Account Holders may view their Account(s) online or may call our office to request an Account statement.

Q: Our family is expecting a newborn. When can our newborn be enrolled in the Prepaid College Trust?
Newborns can be enrolled anytime during the year from the date of their birth until their first birthday at prices that are in effect when the enrollment is completed. This means that prior to the start date of the 2011-2012 Enrollment Period, the prices in effect for newborns will be the prices of the 2010-2011 Enrollment Period. A newborn enrollment is completed upon receipt of a completed Enrollment Form and the applicable Enrollment Fee. 

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