Virginia College Savings Plan Overview

The median annual earnings for workers with a bachelor's degree are 60 percent higher than earnings of workers with a high school diploma, according to the College Board.

College graduates are more likely to vote, tend to be healthier, and are more likely to have access to employee benefits, according to the College Board.

Adults can open a 529 college savings account to save tax free for their own continuing education in technical schools, community colleges, four-year universities and graduate schools. Virginia offers three 529 programs VEST, CollegeAmerica and CollegeWealth to help adults earn advanced credentials. Check them out on this site.

Virginia's 529 college savings accounts may be used to pay for graduate school. Remember, account contributions grow tax free and withdrawals also are tax free as long as they are used for qualified higher education expenses. Plus, Virginia offers a state tax deduction of up to $2,000 a year per account with an unlimited carryforward until all contributions have been deducted.

What does $25 buy today? A video, a loaded pizza or a Virginia 529 college savings account. So skip the flick and save on calories by opening a tax free college savings account for just $25 in one of Virginia's four 529 programs.

To claim your annual Virginia tax deduction for 529 plan contributions, Virginia taxpayers will need to use the Virginia 760-Schedule ADJ form. Contributions up to $2,000 per account are deductible by account owners, with amounts over that carried forward to future years until all contributions have been fully deducted. Account owners age 70 and up can deduct their entire contribution in a single year or over any number of years they choose.

Virginia state tax deductions for investments in 529 college savings accounts are only available through the Virginia College Savings Plan's four 529 programs.

Despite median debt levels of under $20,000, 23 percent of student borrowers from private nonprofit colleges and 14 percent of those at public four-year colleges graduated with $30,000 of debt or more. On the other hand, 38 percent of bachelor's degree recipients from four-year public colleges did not borrow at all and another 30 percent had less than $10,000 in debt when they graduated, according to the College Board's 2006 reports on college pricing and financial aid.

Higher education institutions have been rapidly increasing tuition and other charges in recent years due in part to their own rising costs for employee health benefits and utilities. Another cost factor is faculty salaries, according to the College Board's 2006 report on higher education trends.

In 2005-06, postsecondary students received a total of $134.8 billion in student aid from federal and state governments, colleges, and universities and other private sources. About 44 percent of this aid was from grants, primarily those from colleges and universities, and 51 percent was from federal government loans. Undergraduate students receive significantly more aid from grants than do graduate students, according to the College Board's report, Trends in Student Aid 2006.

Among bachelor's degree recipients in 1999-2000, the latest figures available, those who began their studies in four-year public colleges and universities took an average of 6.2 years to earn their degrees. Those who began in four-year private institutions took an average of 5.3 years to earn their degrees, according to the College Board's report, Trends in Higher Education 2006.

Remedial courses, which generally do not count toward college credit, are increasingly a factor in how long it takes students to complete a bachelor's degree with over one-third of first- and second-year college students having taken remedial courses since high school graduation, according to the College Board's 2006 reports on college pricing and financial aid.

For the cost of a movie, popcorn and a soda, you could open a Virginia College Savings Plan account to save for a child's college education in a tax free and state tax deductible Virginia 529 plan.

Is there a way for grandparents to build college savings tax free for their grandchildren while maintaining control over the accounts? YES. The owner of a Virginia College Savings Plan account holds exclusive control over the use of the account, including naming or changing the beneficiary. An account owner may contribute up to $12,000 a year, ($24,000 if married) for each beneficiary without incurring federal gift tax (if no other gifts are made to the beneficiary by the same individuals that year) And account owners age 70 and up may take a single deduction from their Virginia taxable income now or in the future for their full contributions.

Under federal gift and estate tax laws, 529 plan contributors may give up to $12,000 a year, or $24,000 for married couples, to each beneficiary's 529 account. Any other gifts to the same beneficiary from the same individuals that year must be included in that maximum amount. Also, contributors may choose to average their contributions over five-years for federal gift tax purposes. Usually, these elections require you to file an IRS Form 709.

The owner of a Virginia 529 account holds sole control over his or her account such as naming or changing a beneficiary and requesting distributions. Only the account owner may take the Virginia state tax deduction.

For custodial accounts, the Virginia state tax deduction belongs to the beneficiary, and may be carried forward until the time the beneficiary has Virginia taxable income.

The Virginia College Savings Plan is the largest 529 program in the country.

There are no income phase-outs governing ownership of a 529 account. Each beneficiary's 529 accounts also may collectively reach up to $250,000 in Virginia 529 plans.

When funds are withdrawn from your account, including those for college payments, scholarship refunds or account cancellations, the Virginia College Savings Plan will send an IRS Form 1099-Q in late January.

In cases where distributions are payable to a beneficiary or a higher education institution, the Virginia College Savings Plan will mail an IRS Form 1099-Q in late January directly to the student. For all other distributions, an IRS Form 1099-Q will be sent to the account owner in late January.

To make changes in your account or to update your address, see the Forms section listed among the subject tabs across the top of this screen.

Nationally, average annual tuition and fees at four-year private colleges climbed to $21,235 for the 2005-06 academic year - up from $8,026 a year in 1975-76. At public institutions, tuition and fees jumped to $5,491 in 2005-06 from $1,530, according to the College Board.

Escalating student loan debt is causing a growing number of recent college graduates to delay major decisions. In 2002, 14 percent delayed marriage - up from 7 percent in 1991. Those postponing having children rose to 21 percent in 2002, up from 12 percent. And those delaying home purchase rose to 38 percent from 25 percent in 1991, according to several national education studies.

The number of tax-free 529 plans has mushroomed since 1996. Overall, assets in all 529 plans nationally rose from about $1 billion in 1996 to more than $95 billion, according to the College Savings Plans Network.

Undergraduates rely on loans for 52 percent of their college funding, while graduate and professional students use loans to fund 69 percent of their education costs, according to a 2006 study by the College Board.

Distributions from the Virginia Prepaid Education Program (VPEP) can be used at accredited colleges or universities across the country and at many higher education institutions around the world. This also applies to Virginia's other 529 plans.

Earnings and eligible withdrawals from VPEP (the Virginia Prepaid Education Program ) are not taxed when used to pay college tuition and mandatory fees. Qualified distributions from Virginia's other 529 plans also are tax free.

There are two types of 529 plans: prepaid tuition plans and college savings plans. The Virginia College Savings Plan offers three 529 programs: the Virginia Prepaid Education Program. (VPEP); the Virginia Education Savings Trust (VEST); and CollegeAmerica, our exclusive investment partnership with the American Funds. A fourth plan, CollegeWealth, a bank-based savings plan, is scheduled to open by 2008.

Virginia's 529 savings plans can be used to pay most college expenses, including tuition, mandatory fees, room and board, textbook and supplies, and equipment, such as computers, required by a college for a student's enrollment. Transportation costs are not qualified expenses.

Did you know that the account owner of a custodial account under the Virginia Uniform Transfers to Minors Act or another state's transfer to minors statute (UTMA or UGMA) is actually the beneficiary of the account? There must also be an adult custodian named until the beneficiary reaches the age of majority.

Custodial accounts are irrevocable gifts to the minor and become their property once they reach the age of majority. Unlike non-custodial Virginia College Savings Plan accounts, the beneficiary of a custodial account cannot be changed.

Debt levels for graduating college seniors with student loans more than doubled in a decade, from $9,250 in 1994 to $19,200 in 2004 - a 108 percent increase. One-in-four graduating seniors owed more than $25,000 in loans, which excluded any college borrowing by their families.

Between 1994 and 2005, the proportion of state grant aid to undergraduates that was based on financial need increased in 12 states and decreased in 23 states. Students� academic qualifications are increasingly a factor in the receipt of state grants.