Maryland Prepaid College Trust Maryland College Investment Plan Maryland529.com 888.4MD.GRAD (463.4723)
Why Save for College? An example of how borrowing $25,000, instead of investing, can double the out-of-pocket cost of college: This example was developed by T. Rowe Price and does not consider any investment or loan origination fees. Amounts are adjusted to today’s dollars and assume an inflation/discount rate of 3% annualized. 2
College Savings 101 Question : Does the State of Maryland offer families a tax-deferred savings option for college? 3
ANSWER: YES . Maryland 529 is an independent, non-profit Maryland State Agency that offers two Section 529 college savings plans to help families prepare for the future cost of college and reduce future debt. Allows you to lock-in tomorrow ’ s Managed by T. Rowe Price, offers college tuition based on today ’ s investors a variety of investment prices and helps to hedge against options future tuition increases Any investment growth is tax-deferred at the State and federal level BOTH When funds are used for eligible college expenses, earnings are PLANS • Maryland tax-free • Federally tax-free 4
College Savings 101 Question : Are there any additional tax benefits? 5
ANSWER: Yes. There are unique tax benefits. • Deduct up to $2,500 from your Maryland adjusted gross • Deduct up to $2,500 from your Maryland adjusted income per account each year. gross income per beneficiary each year. • Payments in excess of $2,500 per account can be carried • Contributions in excess of $2,500 per beneficiary can forward and deducted in future years until the full be carried forward and deducted for up to the next 10 amount has been deducted. years. Account Holders and Contributors are eligible for the Maryland income deduction on contributions he or she makes. 6
College Savings 101 Question : Are the Plans just for children? What if I am a grandparent or aunt/uncle? 7
ANSWER: Plans are for adults and children. Families members can help save. Maryland Prepaid Maryland College College Trust Investment Plan Invest for children or adults – Open to 12th graders or younger, Age no age restrictions including newborns Either the account holder or child No Maryland or DC residency Residency must reside in Maryland or DC requirements at the time of enrollment 2016 – 2017 Enrollment Period: Enrollment Enrollment open year-round Period December 1, 2016 – April 24, 2017 You may choose either plan – or both! 8
College Savings 101 Question : Maryland is in the name. Can the Plans only be used at Maryland colleges? 9
ANSWER: Plans can be used Nationwide! MCIP MPCT Eligible Institutions : Eligible Institutions : • • 4-year Colleges and Universities 4-year Colleges and Universities • • In-State In-State • • Out-of-State Out-of-State • • 2-year Community Colleges 2-year Community Colleges • Trade and Technical Schools who have Covered Expenses: a Federal School Code • Tuition and Mandatory Fees or Covered Expenses: Minimum Benefit at a Maryland public • college Any qualified education expense • Up to the Weighted Average Tuition or outlined by IRS Publication 970 • Minimum Benefit at private or out-of Generally includes tuition, fees, books state colleges and supplies • Room, Board, and Books eligible when • Certain room and board, provided the the beneficiary receives a scholarship student is enrolled at least half-time Please review the Plan Disclosure statements for detailed information 10
Qualified Education Expenses Maryland College Investment Plan (MCIP) Qualified Education Expenses Outlined in IRS Publication 970 as expenses related to enrollment or attendance at an eligible institution. Eligible Educational Institution This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education. It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit- making) postsecondary institutions. Confirm that institutions are eligible by identifying their Federal School Code at: https://fafsa.ed.gov/FAFSA/app/schoolSearch?locale=en_EN 11
Benefits Maryland Prepaid College Trust (MPCT) MPCT benefits generally pay for Tuition and mandatory fees for the tuition plan that you purchased, provided the Beneficiary enrolls in college as a full-time student; at least 3 years have passed since enrollment; and all payments have been satisfied: If your Beneficiary attends a Maryland public college , the MPCT will pay the full in-state or in-county Tuition at that college OR your Minimum Benefit, whichever is greater. If your Beneficiary attends an eligible private or out-of-state college , the MPCT will pay Tuition up to the Weighted Average Tuition OR your Minimum Benefit, whichever is greater. You would then have to make up any difference. 12
College Savings 101 Question : I don’t have a lot extra money in my budget. Does it cost a lot to get started? 13
ANSWER: There are affordable options. Prepaid College Trust College Investment Plan Choose a variety of payment and tuition options Minimum investment: $250 by check; or Affordability Plan offerings: $25 a month 1 semester up to 4 years of university 1 or 2 years of community college Combination of both Payment options include monthly, annually or extended Flexibility Change tuition/payment option nearly at any Choose from a variety of time investment options Purchase additional semesters or years at Make contributions systematically • nearly any time Bank Account • Payroll Add additional contributions for birthdays, holidays, etc. 14
College Savings 101 Question : Would I lose my savings if my student doesn’t go to college or gets a scholarship? 15
ANSWER: You have options. Transfer to MCIP Apply to cover Transfer Unused other eligible Benefits to expenses – books, another child room & board, etc. MPCT Defer until Request a graduate Refund* school Change the Defer until beneficiary to graduate yourself school Transfer to Take a another family Distribution* MCIP member *There may be negative federal and/or state tax effects. Please consult with your tax advisor before taking a distribution or receiving a refund in these cases.
College Savings 101 Question : If I elect to take a refund or withdraw money for non-qualified expenses, will there be tax consequences? 17
ANSWER: Yes. • Income Tax on the • Income Tax on the Student earnings earnings if • 10% Penalty on earnings Receives Student equivalent amount • No penalty for disability Scholarship, Doesn’t is withdrawn or death Grant or • Recapture MD Attend • Recapture MD income income deduction Tuition School deduction on principal on the principal Remission • See MPCT Specific information below MPCT Specific If the child does not receive a scholarship, grant or tuition remission and does not have a qualified exception (death or disability), the account holder may choose to receive a Reduced Refund as follows: Your actual payments, less any administrative fees and benefits used, plus or minus: • 50% of the earnings/losses on those payments if enrolled < 3 years • 90% of the earnings/losses on those payments if enrolled ≥ 3 years 18
College Savings 101 Question : Are there additional details about each plan I should know? 19
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2016-2017 Maryland 4-Year Public College Costs St. Mary ’ s College of Maryland $14,192 $11,264 University of Maryland, Baltimore County $10,181 University of Maryland, College Park $9,874 Weighted Average Tuition $9,480 Towson University $9,364 Salisbury University $8,702 Frostburg State University $8,596 University of Baltimore $7,880 Bowie State University $7,804 University of Maryland Eastern Shore $7,636 Morgan State University $6,448 Coppin State University *Tuition benefits are paid per semester – A beneficiary attending a private or out-of-state college for the 2016 – 2017 Academic Year receives up to $4,937 per semester – or the Minimum Benefit - whichever is greater. 21
Tuition Plan Options University Plan Community College Plan Two Plus Two Plan 2 years at a Community 1 semester or 1, 2, 3, or 4 1 or 2 years at a College and 2 years at a years at a 4-year college Community College 4-year college Existing account holders can add additional semesters or years outside of the enrollment period at current prices Other family members can purchase years or semesters too! The Prepaid College Trust is backed by a Maryland Legislative Guarantee 22
Payment Options 5-Year Extended Down Lump Annual Monthly Monthly Payment Sum Payment Payment Payment 25%, 40% or 55% Equal monthly One-time of the lump sum 60 equal payments through payment for Equal yearly price with the monthly December of the the full amount remaining amount payments payments year before the of the tuition to Beneficiary’s plan selected be paid projected year monthly or of high school annually graduation or year of Initial Eligibility 23
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