Maryland Prepaid College Trust Account Holder FAQs

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. 

You 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 Account in the Prepaid College Trust, you must complete a Rollover Form and 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 a Payment. If no payment is received within 60 days of the first payment  due date of this Contract, you 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 your request with full payment, subject to Board approval.

Missed Payments. If a payment has been made but subsequent payments are missed, your Account will be in default after 30 days of nonpayment and be deemed delinquent. If no  payment has been received within 180 days of the last payment, you will receive a warning letter. If no payment is received within 210 days of the last payment, your Account will be canceled and can only be reinstated at your 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.  

You may:

1) Pay more than your monthly or annual payment amount. This may lessen the number of monthly or annual payments you will have to make. This will not reduce the total amount of your payments.

2) Reduce the total amount of your payments 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 your payoff amount, you may either send an email request to: accounts@collegesavingsmd.org or call our toll-free number, 1-888-4MD-GRAD and select option 2, then option 1, to speak with a representative.  You may also access your Account online to obtain your payoff amount.  If you obtain the payoff amount online, please print the page which shows the payoff amount, enclose it with your check and mail it to: MPCT, P.O. Box 17412, Baltimore, MD 21297-1412.  Please include your account number and the words "payoff" on your check.

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 you select and pay for under this Contract. You can start using Benefits beginning with each fall semester of the projected enrollment year(s) you have purchased, as identified on your Certificate of Tuition Benefits.

If your Beneficiary attends a Maryland 4-year public college as a full-time student, the  Prepaid College Trust will pay the full in-state Tuition or the full in-county Tuition if your Beneficiary attends a two-year Maryland Community College. If your Beneficiary attends an Eligible Institution 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 you 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?

This Contract must be in effect for at least three years before Benefits will be paid. Benefits will be paid no earlier than the first fall academic semester at an Eligible Institution following the three-year anniversary of the effective date of your Contract.

Q: What is the Weighted Average Tuition and how much is it?

The Weighted Average Tuition is the in-state or in-county Tuition at each Maryland public college times 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 2008 - 2009 academic year are listed below.   

For the 2008 - 2009 academic year: 

	Weighted Average Tuition	Tuition +	Mandatory Fees
4 Year Public Colleges	$7,927	$6,097	$1,830
Community Colleges	$3,465	$2,918	$547

 

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 Qualified Higher Education Expenses. 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.  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 this Contract plus a reasonable rate of return.  This monthly rate of return is equal to 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 this Contract, in the event that Tuition at an Eligible Institution is less than payments you make under this Contract plus a reasonable return, you may use the difference for other Qualified Higher Education Expenses such as room and board and books. Minimum Benefits are calculated each September for the University Plan and for the Community College Plan.

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 this Contract from one tuition plan to another (i.e. a Community College Plan to University Plan and visa versa) upon written request to the Board and upon payment of any required fees. As a result of the conversion, the Board will revalue this 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?

Each March, the Maryland Prepaid College Trust mails a Benefits Eligibility Form to all Account Holders of Accounts that are eligible to use tuition Benefits to confirm that the Beneficiary will be using Benefits for the upcoming academic year that begins in the fall.  The form should be completed, signed by the Account Holder, and returned to the Prepaid College Trust’s office.

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 also should be completed, signed by the Account Holder, and returned to the Prepaid College Trust’s office with any required documentation.

If you lose or misplace these forms, you may download the Benefits Eligibility Form and Benefits Claim Form from our website.  You also may contact our office via email at accounts@collegesavingsmd.org or call us at 1-888-4MD-GRAD and select option #2, then 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 halftime.  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?

Our office will mail the check directly to the college along with the college’s remittance advice, if provided. In addition, a letter is mailed to the Account Holder at their address of record that confirms the payment. You may also confirm that your payment was made by accessing your account online at our website and viewing the section on Distributions.

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 2008, your contribution needs to be postmarked by December 31, 2008.

 Account Termination, Transfer, and Refund

 Q: How can I close my account and what types of refunds are available?

 Refunds are only given at the written request of the Account Holder, with an original  signature, for a specific semester(s) or year(s) 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 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, 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 this 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 this 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.

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 you make a payment by check, money order, or electronic funds transfer, we reserve the right, subject to applicable law, to restrict distribution of that payment from your Account for up to 10 days after the funds are deposited. You 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, please fill out a “Change of Address Form”, sign, then return to us via fax (410-333-2295) or by U.S. mail (College Savings Plans of Maryland, 217 East Redwood Street, Suite 1350, Baltimore, MD 21202)

Q: How can I change my Tuition Plan or Payment Option?

You are more than welcome at anytime to change the Tuition Plan or Payment Option that was originally selected.  To make a change to your Tuition Plan or Payment Option, please download and complete the Tuition Plan Change Form. 

Download the form, fill it out and sign and return to us via fax (410-333-2295) or by U.S. mail (College Savings Plans of Maryland, 217 East Redwood Street, Suite 1350, Baltimore, MD 21202).  You may also request a form be mailed to you by calling 1-888-4MD-GRAD and selecting option #2 then option #1.

Q: How can I change the beneficiary on my account?

You may change the Beneficiary to a Member of the Family of the Beneficiary 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 or transfer the overpayment to another Member of the Family of the original Beneficiary. If you change the Beneficiary, all terms and conditions of this Contract continue to apply, even though the original Beneficiary has been changed.

 To make a change to your Beneficiary, please download the Change of Beneficiary Form, fill it out and sign and return to us via fax (410-333-2295) or by U.S. mail (College Savings Plans of Maryland, 217 East Redwood Street, Suite 1350, Baltimore, MD 21202).  You may also request a form be mailed to you by calling 1-888-4MD-GRAD and selecting option #2 then option #1.

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 download the Change of Account Holder Form, fill it out and sign and return to us via fax (410-333-2295) or by U.S. mail (College Savings Plans of Maryland, 217 East Redwood Street, Suite 1350, Baltimore, MD 21202).  You may also request a form be mailed to you by calling 1-888-4MD-GRAD and selecting option #2 then option #1.

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 direct in writing that someone other than you may request or receive information regarding your 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 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 Enrollment Kit.

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 stepgrandchild. 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 would typically be 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. 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 they 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 you can terminate this 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.

You may designate an Account Holder’s Successor to take control of the Account in the event of your death. You may modify or terminate this 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 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. The value of your Account will be updated only on dates on which the New York Stock Exchange is open for business. 

2. This Contract will terminate 10 years after your 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. You 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 this Contract, Unused Benefits remain in your Account, and no waiver has been made, the Contract will be terminated. If you have not claimed the Unused Benefits within five years, the Benefits may be considered abandoned property and will, without proper claim by the Account Holder, revert to the State. 

3. If (a) you fail 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. It will show your payments and any Benefits that have been paid on the Account. At any time, however, you may view your Account online at www.collegesavingsmd.org or 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 2008-2009 Enrollment Period, the prices in effect for newborns will be the prices of the 2007-2008 Enrollment Period. A newborn enrollment is completed upon receipt of a completed Enrollment Form and the applicable Enrollment Fee.