Virginia College Savings Plan Overview

Our Top 10 Questions	Expand All Collapse All

1. Why choose Virginia's 529 plans?

We offer a broad array of innovative investment options. With over ten years experience, we have a high level of expertise in operating 529 college savings plans. We strive to provide unparalleled customer service.

2. What if my child gets a scholarship?

If your child receives a scholarship, you may request a refund. The earnings portion of the refund will be taxed as ordinary income at the federal level and will be exempt from Virginia income tax. There is no 10% of earnings penalty on scholarship refunds.

To avoid paying any tax, the account owner can change the beneficiary of the account to a member of the family of the current beneficiary.

3. What are qualified higher education expenses?

Qualified expenses include tuition, mandatory fees, room and board, and computers, textbooks and supplies required for enrollment or attendance by an eligible educational institution.

Travel expenses, including airfare, are not a qualified expense.

4. Are other individuals allowed to make contributions to my account?

Anyone can make a contribution to an account. But for state tax reporting and administrative purposes, all payments are deemed to come from the account owner. Contributors to an account, other than the account owner, do not qualify for the Virginia tax deduction. Nor do they have any control over contributions to another person's account.

5. Who manages the money I pay into VPEP or VEST?

VPEP and VEST are administered by the eight-member VCSP Board, the Investment Advisory Committee, and the Executive Director. Investments include both stocks and bonds, professionally managed for competitive returns consistent with prudent investment strategies. For VPEP, a valuation is conducted each year by a nationally recognized acturial firm to evaluate its financial soundness.

6. What happens to my account if I die?

All account owners must designate an individual or entity to take over ownership of the account in the event of the account owner's death. Individuals designated must be at least 18 years old at the time of designation. Account owners may change this designation at any time by submitting a written request.

Custodial accounts under Uniform Gifts to Minors/ Uniform Transfers to Minors statutes should have the beneficiary's estate designated as the survivor. Accounts owned by trusts, corporations or other entities do not need a survivorship designation but should provide a successor trustee or other contact.

If an account does not have a valid survivorship designation at the time of the account owner's death, the VCSP reserves the right to designate the current beneficiary of the account as the new owner.

7. Does the purchase of a VPEP contract or VEST account guarantee the student admission to a college or university or in-state tuition rates?

No. Students must apply to and be accepted by the college or university they wish to attend. Ownership of a VCSP account has no bearing on the admissions process in Virginia or elsewhere.

8. I have reviewed the information, where do I get an application?

You can open an account in one of two ways. Online application processing is available on our site here. You may pay your application fee by using either a credit card (MasterCard or VISA) or by mailing us a check. You may not make payments other than the application fee using a credit card. You can also fill out the application included in the Enrollment Kit and return it to us along with a non-refundable $25 application fee. Checks should be made payable to the VCSP program you select. If you choose to make payments directly from your bank account, please complete the ACH form that will be included in your Welcome Kit. Account owners must be 18 years of age or older and be U.S. citizens or legal residents.

9. Will participating affect my child's chances for financial aid?

Congress passed legislation in 2006 stipulating that savings in all types of Section 529 plans must be treated equally in financial aid considerations. Previously, savings and prepaid 529 plans were treated differently.

Need-based aid

Section 529 plans are considered as non-retirement assets of the account owner. Up to 5.6 percent of parents' non-retirement assets, including their 529 plan holdings, are taken into account in determining eligibility. For students, this rate increases to 35%, though 529 accounts owned by dependent students currently are not included as assets when determining federal financial aid eligibility. Effective July 1, 2007, the student asset conversion rate will change from 35% to 20%.

Other factors in the federal aid formula are the family's size, income, assets, benefits (unemployment or Social Security) and how many children currently are attending college. The family's home and retirement accounts are not included in federal aid considerations.

Merit-based aid

Ownership of a 529 plan should not affect a student's eligibility for merit-based financial aid, including academic and athletic scholarships. Participation in the Virginia College Savings Plan also does not impact a Virginia student's eligibility for a Virginia Tuition Assistance Grant to an eligible private, nonprofit institution of higher education in the Commonwealth.

Financial realities

It's important to consider the realities of financial aid. Despite modest increases, there are only enough aid funds to meet part of students' needs. That leaves federal and private loans, which students or their families must repay, as the biggest portion of financial aid.

10. Is my account protected if I face financial problems?

While this depends on the specific situation, Virginia law provides VCSP accounts protection from creditors of either the account owner or the beneficiary: this protection generally may be preserved by a debtor in a bankruptcy case. Additional protection of these assets is available under federal bankruptcy law.