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 VPEP Frequently Asked Questions
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On this page you will find our most commonly asked questions about VPEP.
Please note that these questions relate to VPEP. If you have questions related to CollegeAmerica please contact your financial adviser. For CollegeWealth, please contact a participating bank or financial institution.
You can use our handy search function to find your question more quickly.
And if you don't see your question listed here, feel free to submit it to us and one of our representatives will get back to you shortly.
As always, we're here to help so don't hesitate to contact us at our toll-free helpline at 1-888-567-0540.
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| Q. How do I purchase a contract? |
A. You can open an account in one of two ways. Online application processing is available on the Virginia College Savings Plan web site at www.Virginia529.com. You will need to use a credit card (MasterCard or VISA) for the application fee. You may not make payments other than the application fee using a credit card. You can also fill out the VPEP application included in the Enrollment Kit during an enrollment period and send it in along with a non-refundable $25 application fee. Checks should be made payable to VPEP. If you choose to make payments directly from your bank account, please complete the ACH form that will be included in your Welcome Kit.
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| Q. Will I receive an official document outlining the terms and conditions of my VPEP contract? |
| A. Yes. Included in the Enrollment Kit is a copy of the most recent Disclosure Statement and Master Agreement. After your application is processed, you will receive a Welcome Kit containing a Participation and Payment Schedule. This document, plus your application and the Master Agreement, make up your VPEP contract. If you apply online, you must sign and return the acceptance form to us to allow for future signature verification. Potential account owners are urged to read the VPEP documents carefully and to clarify any information they do not understand before purchasing a VPEP contract by calling the toll-free helpline at 1-888-567-0540. Account owners should retain the contract documents for future use and reference. |
| Q. Are other individuals allowed to make contributions to my account? |
| A. Yes. Anyone can make a contribution to your account. However, all payments made on a VPEP account are deemed to come from the account owner for all state tax reporting and other administrative purposes. Non-account owners have not established a customer relationship with VPEP, are not allowed to deduct these contributions from their Virginia taxable income, and lose all control over funds contributed to another person's account. |
| Q. What administrative fees will I have to pay? |
| A. VPEP administrative fees are listed at the end of the Master Agreement, a copy of which is included in the Enrollment Kit following the VPEP Disclosure Statement. Click here [PDF document, opens in new window] to view the administrative fees found in the Master Agreement of the VPEP Enrollment Kit. The Board may change or waive administrative fees in its sole discretion and upon consideration of individual written requests in cases of hardship. There are no investment fees or charges related to a VPEP account. |
| Q. Is there an individual account set up for my money? |
| A. No. The program is not an individual savings account. It is a trust fund that combines the contributions of all participants in order to maximize benefits from institutional investment activities. VPEP does maintain separate accounting records for each participant and his or her contributions for the purpose of calculating refunds, tax reporting, and administering payments when a student enters college. Account owners will receive annual account statements reflecting contributions, distributions and other financial data relating to their VPEP contract. Account owners may also access their account information online with a user identification number and PIN that will be provided in the Welcome Kit. |
| Q. Who manages the money I pay into VPEP? |
| A. VPEP is administered by the eight-member Virginia College Savings Plan 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. Please refer to the Disclosure Statement for a list of current outside investment managers. Each year VPEP receives a valuation by a nationally recognized actuarial firm to evaluate its financial soundness. |
| Q. What happens to my account if I die? |
| A. All VPEP 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. If the current beneficiary is under the age of 21, the VCSP may designate the deceased account owner's executor or administrator, if any, as the custodian under the appropriate Uniform Gifts to Minors/Uniform Transfers to Minors statute for the current beneficiary until the current beneficiary reaches the age of 21. If no executor or administrator was named or appointed, the VCSP, in its sole discretion, may designate a parent or other close relative of the current beneficiary as the custodian. |
| Q. May I send in my power of attorney? |
| A. Yes. Account owners are encouraged to send in power of attorney documents designating another individual to act for them in the event of their absence or disability. All powers of attorney must be submitted to the VCSP for approval prior to having the attorney-in-fact sign any documents related to VCSP accounts. |
| Q. Does the purchase of a VPEP contract guarantee the student admission to a college or university or in-state tuition rates? |
| A. No. Students must be accepted by the college or university they wish to attend. VPEP contracts are not considered as part of the admissions process. Ownership of a VPEP contract is not a factor in the determination by a particular state institution as to whether a student is eligible for in-state tuition rates. VPEP will not release the names of students who are beneficiaries of VPEP contracts to higher education institutions without the permission of the account owner. |
| Q. Should I report my VPEP contract as a debt when applying for credit? |
A. No. A VPEP contract is an asset, not a loan or debt. You do not need to disclose your monthly VPEP payments on credit or loan applications, except as an investment that you own. All VPEP account information is confidential and will not be released to unauthorized third parties without the account owner's consent.
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| Q. Can I purchase a VPEP contract to use as a scholarship? |
| A. Yes. You may open a VPEP account to use as a scholarship, but the beneficiary must be designated at the time the account is opened and the account balance may only be transferred to a member of the current beneficiary's family. Alternatively, you may wish to consider a tax-deductible contribution to the VCSP. The VCSP would use your donation to open an account, which would be owned by the agency, and track the scholarship award for you. The beneficiary can be designated at a later date from a broad group of candidates. Please call our toll-free number, 1-888-567-0540, for information on opening a scholarship account. |
| Q. Why should I consider prepaying tuition through VPEP instead of investing the money myself until my child needs it for college? |
| A. By prepaying your child's tuition and fees through VPEP, you can take an important step toward being ready for the expense of a college education. If your child attends a Virginia public college or university he or she has complete coverage of in-state undergraduate tuition and mandatory fees for a normal full-time course load for a general course of study for the number of years you purchased. And your VPEP investment is fully transferable to all eligible Virginia private colleges and out-of-state schools so that you will have already taken care of a portion of those tuition and fee expenses as well. You should take into account the Virginia and federal tax advantages and VPEP's tax-free growth and distributions for qualified expenses when comparing VPEP to other college savings vehicles. Because of VPEP's tax-advantaged status, however, funds invested are required to be used for qualified higher education expenses. While VPEP accounts can be cancelled at any time, there is a federal penalty tax equal to 10% of earnings if the cancellation is for any reason other than a qualified rollover or the beneficiary's death, disability or receipt of a scholarship. In addition, any amounts previously deducted from the account owner's Virginia taxable income must be recaptured unless the account is cancelled due to a beneficiary's death, disability, receipt of a scholarship, or a qualified rollover to the Virginia Education Savings Trust, CollegeAmerica or CollegeWealth. |
| Q. If I have financial problems, will my creditors be able to attach or
garnish VPEP contract benefits? |
| A. This will depend on the specific
situation, but under Virginia law, VPEP accounts are protected from
creditors of either the account owner or the beneficiary, and this
protection generally may be preserved by a debtor in a bankruptcy case.
Additional protection of these assets is available under federal
bankruptcy law, as amended by the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA). Federal bankruptcy law, as
amended by BAPCPA provisions effective as of October 17, 2005, protects
contributions made at least two years before a bankruptcy filing to a
VPEP account for the children or grandchildren of the account owner or
other individual contributing to a VPEP account. Federal bankruptcy law
also offers limited protection for contributions made at least one year
before a bankruptcy filing to a VPEP account for the children or
grandchildren of the account owner or other individual contributing to
a VPEP account. |
| Q. What other Section 529 college savings options does the Virginia College Savings Plan offer? |
| A. The Virginia College Savings Plan also offers the Virginia Education Savings Trust (VEST), which allows families to save for college costs, including tuition, fees, room and board, and required books, supplies and computers, through a variety of professionally managed investment options. CollegeAmerica, the Commonwealth's partnership with the American Funds, is available only through financial advisers. CollegeWealth, the Virginia College Savings Plan's newest savings option providing FDIC-insured certificates of deposit and savings accounts, will be available soon at participating banks. CollegeAmerica, VEST and CollegeWealth have no state residency or age requirements, and, like all Section 529 plans, have no income phaseout restrictions. |
| Q. Will VPEP be offered again in the future? |
| A. The Board of the Virginia College Savings Plan decides each year whether to open an enrollment period. There is no requirement that the Board authorize an enrollment period each year, or that they authorize additional enrollment periods in the future. The terms and features of VPEP in subsequent enrollment periods may differ from the terms and features of this enrollment period. If college tuition and fees rise, the prices of future contracts will be higher. Contracts purchased this year will not be affected by any future contract price increases. |
| Q. Am I allowed to have both a VPEP contract and another 529 account such as a VEST account? |
| A. Yes. The same individual or different individuals may have more than one 529 account for the same beneficiary. Complementary college savings options may be beneficial for families seeking a fully diversified college savings portfolio with a guaranteed investment (like VPEP or CollegeWealth) and a market return investment (like VEST or CollegeAmerica). VEST accounts may be rolled over into VPEP contracts during a VPEP enrollment period as long as VPEP eligibility requirements are met. VPEP contracts may be rolled over into VEST, CollegeAmerica or CollegeWealth accounts at any time. |
| Q. Does VPEP have a financial guarantee? |
| A. Yes. State legislation provides a financial guarantee in each year's state budget to cover VPEP's contractual obligations in the event of a funding shortfall. This provision can only be changed by the Virginia General Assembly, subject to the Governor's veto, and the General Assembly's ability to override a veto. |
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| Q. If a student decides to attend a Virginia private college or university or an out-of-state school does VPEP provide any benefits? |
A. Yes. VPEP benefits can be used at any accredited college or university in the country that is eligible to participate in U.S. Department of Education student financial aid programs. VPEP benefits may also be applied at schools abroad under certain circumstances, as well as at certain accredited private career schools. VPEP benefits may be applied at eligible educational institutions other than Virginia public colleges and universities as follows: Virginia Private Colleges - Benefits will be applied on behalf of students who attend Virginia private schools, including certain private career schools. VPEP will pay to the Virginia private college or career school the lesser of 1) the payments made on the contract plus the actual rate of return or 2) the highest in-state undergraduate tuition and mandatory fees at a Virginia public school in the same academic year the benefits are used.
Out-of-State Colleges and Universities - VPEP will pay the lesser of 1) the payments made on the contract plus interest at the composite reasonable rate of return or 2) the average in-state undergraduate tuition and mandatory fees at Virginia public schools for the same academic year the benefits are used. |
| Q. What college expenses does a VPEP contract cover? |
| A. A VPEP contract is guaranteed to cover in-state undergraduate tuition and all mandatory fees at Virginia public community colleges and four-year colleges and universities for the normal full-time course load for students enrolled in a general course of study for the type of contract and number of years purchased. If there are additional charges for a specific course of study, such as nursing or engineering, or for more than a full-time course load, these additional costs are not covered by VPEP. The number of credit hours that constitutes a full-time course load varies by higher education institution. For additional information about the full-time course load for a specific school, please contact us toll free at 1-888-567-0540 or by email at vcspinfo@virginia529.com. Mandatory fees are those fees required as a condition of enrollment for all students attending a particular college or university, regardless of major or program of study. VPEP does not cover laboratory fees, course-specific or optional fees, room and board, transportation, computers, books, or any fees not listed on the school's invoice. VPEP benefits may also be applied toward the cost of tuition and fees (both undergraduate and graduate) at any eligible educational institution, including Virginia private schools, certain private career schools, and out-of-state schools, although full coverage of these costs is not guaranteed. |
| Q. May a student use VPEP contract benefits for graduate school? |
| A. Yes. VPEP benefits may be used at accredited graduate schools that are eligible to participate in U.S. Department of Education student financial aid programs. Payments for tuition and mandatory fees at graduate schools will not exceed the undergraduate level benefits as described above. For example, if a student attends law school at the University of Virginia, VPEP will pay the amount of in-state undergraduate tuition and mandatory fees for a normal, full-time course load at the University of Virginia for the same academic year. If a student attends graduate school at a Virginia private college or at an out-of-state school, VPEP will apply the same benefit formulas to help cover tuition and fees as it would to undergraduate costs at the same school. |
| Q. If my child attends a professional career school or computer institute, can I still use my VPEP contract? |
| A. Yes. VPEP benefits may also be applied at certain for-profit vocational and technical schools and colleges that qualify as eligible educational institutions under Section 529 of the Internal Revenue Code. In order to qualify as an eligible educational institution, the school must be accredited and be eligible to participate in federal student financial aid programs. VPEP does not guarantee to cover the full cost of attendance at these schools. Students will receive the same benefits as if the student were attending a private college or university in Virginia or out of state. |
| Q. Can VPEP benefits be applied toward summer school or inter-session costs? |
| A. Yes. If a student attends summer school or an intersession, VPEP benefits may be used, but this will result in early depletion of the account. If you are considering using VPEP benefits for summer school or for an intersession, you must contact us in advance to arrange for partial usage of benefits. Account owners should carefully consider whether the partial use of benefits will be in their best interest, as full-semester usage of VPEP benefits generally provides the best value. |
| Q. How long does a student have to use the benefits? |
| A. A student has at least ten years after the projected high school graduation date to use VPEP contract benefits. In addition, any years served as an active duty member of any branch of the United States Armed Services are added to the ten-year limit. Extensions of the ten-year limit may be requested. Funds remaining at the end of the ten-year period may be transferred to a member of the beneficiary's family, as defined in the Disclosure Statement, as long as the new beneficiary meets current VPEP enrollment requirements, or distributed to the account owner. If, after the ten-year period specified above, a VPEP account has a remaining balance, no extension has been requested and the VCSP cannot locate the account owner, the beneficiary, or any designee of survivorship rights, the VCSP shall report the unclaimed amounts to the State Treasurer as unclaimed property pursuant to Section 55-210.12 of the Code of Virginia (1950). |
| Q. How will VPEP affect a student's eligibility for financial aid? |
| A. Any investments or savings may affect financial aid eligibility. For need-based financial aid, VPEP contract benefits are reported on the Free Application for Federal Student Aid (FAFSA) if the contract is owned by the beneficiary's parent whose assets are reported on the FAFSA. Approximately 5.6% of the contract's value will be included in the calculation of federal financial aid eligibility. If the VPEP contract is owned by a dependent student (custodial accounts under Uniform Transfers to Minors or Uniform Gifts to Minors statutes) its value is not counted toward federal financial aid eligibility. If the VPEP contract is owned by someone whose assets are not reported on the FAFSA, its value is also not included in this calculation. The receipt of contract benefits should not affect the beneficiary's receipt of merit-based financial aid (academic or athletic scholarships, for example). If a student receives a full or partial athletic scholarship that is governed by NCAA or ACC regulations, a payment from VPEP may affect that scholarship. Ownership of a VPEP contract will not be taken into account when determining a student's eligibility for Virginia financial aid. VPEP benefits do not affect a student's eligibility for a Virginia Tuition Assistance Grant for Virginia residents who attend an eligible, independent, nonprofit institution of higher education in Virginia. Because the largest part of most financial aid packages is student loans, families who plan ahead by saving can significantly reduce future debt. The best resource for more detailed information is the financial aid office of your local community college or university. |
| Q. Can my VPEP contract have any effect on other aid or benefit programs? |
| A. Yes. A VPEP contract may be considered an asset of the account owner or beneficiary and therefore may affect qualification for need-based federal or state benefit programs, such as Medicaid. You may wish to contact the federal or state agency that administers a particular benefit program to determine how your VPEP contract will be treated. |
| Q. What if the amount I paid for my VPEP contract plus interest is more than the tuition and mandatory fees to be paid by VPEP? |
| A. If the amount VPEP would pay to a school under the applicable benefit formula is less than the amount you paid for your contract plus the reasonable rate of return, you may roll the principal plus interest (compounded annually) into a VEST account. You may then request a distribution from your new VEST account to be applied not only towards tuition and fees but also for other qualified higher education expenses, such as room and board. |
| Q. What is the reasonable rate of return? |
| A. The reasonable rate of return is a composite interest rate that tracks an institutional money market index. This rate will change quarterly to reflect current interest rates. It is applied in calculating payments to out-of-state schools, refunds in the event of death, disability or scholarship, or cancellations or rollovers of contracts held for more than three years. VPEP's federal and Virginia income tax advantages should be taken into account in determining the effective rate of return of benefit payments using the reasonable rate. Click here [PDF document, 16k, opens in new window] for a chart of the reasonable rate of return since VPEP's inception. |
| Q. How will VPEP pay benefits? |
| A. Several months prior to the beneficiary's graduation from high school,
VPEP will send out a Benefits Guide with instructions for using
benefits. When VPEP has been properly notified of the student's
acceptance at a college or university by the receipt of an Intent to
Enroll Form, VPEP will make arrangements for direct payments to the
school. Any costs not covered by the VPEP contract will be the family's
or student's responsibility. |
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| Q. What are VPEP'S eligibility requirements? |
| A. Children who are currently in the ninth grade or younger are eligible to participate in the program, although the beneficiary must have been born at the time the account is opened. Either the account owner or the beneficiary must be a Virginia resident at the time the application is signed. The account owner can be an individual, trust, corporation, partnership or other entity. The account owner does not have to be related to the beneficiary. Children of military personnel who are stationed in Virginia or claim Virginia as their home of record can also be beneficiaries. Account owners and beneficiaries must be U.S. citizens or legal residents. |
| Q. May I transfer funds from a Coverdell Education Savings Account, Series EE or I Bonds, or another qualified tuition program? |
| A. Yes. VPEP will accept transfers from a Coverdell Education Savings Account, Series EE or I Bonds, or another qualified tuition program. If you are funding your VPEP contract with funds from these sources, you must provide the breakdown of the amount you contributed and the amount of interest earnings. For transfers from a Coverdell Education Savings Account, please provide an account statement issued by the financial institution that acted as trustee or custodian showing contributions and earnings (or losses) in the account. For redemptions of qualified Series EE or I U.S. Savings Bonds, please provide a statement, a Form 1099-INT issued by the financial institution that redeemed the bonds, or an IRS Form 8815 showing interest from the redemption of the bonds. Please ensure that you redeem the bonds in the same calendar year that you fund your VPEP contract. If you have additional questions about the redemption of U.S. Savings Bonds, please contact the Bureau of Public Debt at www.TreasuryDirect.gov, or the Internal Revenue Service at 1-800-829-1040. For rollovers from another Section 529 program, the program manager must provide a statement showing contributions and earnings (or losses). |
| Q. As a court-appointed legal guardian, may I open a VPEP account? |
| A. As long as a VPEP account is permissible under the legal guardianship provisions, you may open a VPEP account in your capacity as guardian. Please check the other box on the VPEP application and fill in the appropriate information provided by the court order. |
| Q. May two people jointly purchase a contract? |
| A. No. Only one account owner is allowed and that person is the owner of the contract. If a trust or other entity requires two or more signatures for the disbursement of funds, VPEP may not be an appropriate investment as we cannot accommodate more than one primary individual who is responsible for the account. Although anyone may make payments on a contract, only the account owner of record may take the Virginia tax deduction or make decisions related to the contract (such as rollover, transfer and cancellation). Unless the account owner makes a written request either on the application or at a later date to allow another individual to receive account information, only the account owner may receive information about the contract unless required by a court order or other legal process. If the contract is cancelled, only the account owner is entitled to the refund. |
| Q. Can I transfer ownership of the contract? |
| A. Yes. Ownership of the contract can be transferred by changing the account owner. You are not allowed to sell your VPEP contract to someone else. Written authorization is required from the current account owner. To request an Account Owner Transfer Form, call us toll free at 1-888-567-0540 or download the form from our Web site, www.Virginia529.com. There may be tax consequences related to the transfer of a VPEP contract, so please contact a tax professional to determine the effect of a transfer on your individual situation. |
| Q. May I enroll my newborn outside the VPEP enrollment period? |
| A. No. You will need to wait until the next VPEP enrollment period. There is no requirement that an enrollment period be held each year. Please contact us to find out when the next enrollment period will be held, or to be placed on a list of those who wish to receive information when the next enrollment period opens. |
| Q. May I use an existing Uniform Gifts to Minors Act (UGMA) or Uniform
Transfers to Minors Act (UTMA) account to purchase a VPEP contract? |
| A.
Depending on the specific state legislation, you may be able to
purchase a VPEP contract with cash proceeds from the sale of assets
held in a Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to
Minors Act (UTMA) custodial account. These types of accounts, however,
involve additional restrictions that do not apply to non-custodial VPEP
contracts, such as the inability to transfer the contract to another
beneficiary. If you are using existing UGMA or UTMA funds to establish
a VPEP contract, you must indicate that the account is custodial by
checking the appropriate box on your application. The Virginia College
Savings Plan is not responsible for any consequences related to the
custodian's improper use, transfer or characterization of custodial
funds. The custodian is responsible for transferring the custodial
account to the beneficiary at the appropriate time. Please contact a
legal or tax professional to determine how to use an existing UGMA or
UTMA account to fund a VPEP contract, and what the implications of such
a transfer may be for your specific situation. |
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| Q. What plans are available under VPEP? |
| A. VPEP offers both a University Plan and a Community College Plan. Under the Community College Plan, you may purchase a one-, two- or three-year contract. Under the University Plan, you may purchase a one-, two-, three-, four- or even five-year contract. Although you must purchase at least a one-year contract under either plan, you can combine years from both plans (not to exceed a total of eight years of undergraduate study). For example, you may buy a two-year Community College Plan and a two-year University Plan. Keep in mind that the only difference between the two plans is the pricing, as the plans may be applied at both types of schools. |
| Q. What if I own a community college contract and my child attends a university or vice versa? |
| A. Every enrollment period, VPEP calculates a conversion factor equal to the relationship between the one-year Community College Plan prices and the one-year University Plan prices. The conversion factor for the 2006-2007 enrollment period is approximately .3, which means that a one-year community college contract will cover approximately one third of the annual in-state undergraduate tuition and mandatory fees at a Virginia public four-year college or university. Conversely, a one-year university contract will cover approximately three years of Virginia community college tuition and fees. VPEP will use the conversion factor to calculate benefits if a student attends a type of school that is different than the type of plan purchased. |
| Q. May I still use my VPEP benefits if I move out of state? |
| A. Yes. If any VPEP beneficiary, no matter where he or she lives, attends an out-of-state school, VPEP will pay the lesser of 1) the payments made on the contract plus interest at the composite reasonable rate of return [PDF document, 16k, opens in new window]
or 2) the average in-state undergraduate tuition and mandatory fees at Virginia public schools in the same academic year the benefits are used. A VPEP beneficiary may also attend a Virginia public college or university as an out-of-state student. In this case, VPEP will still pay the current undergraduate tuition and mandatory fees at the in-state rate. The student will be responsible for the out-of-state differential. VPEP will also pay the same benefits on behalf of students who have moved out of state and attend a private school in Virginia as it will for Virginia residents who attend in-state private schools. |
| Q. May a student transfer from a community college to a four-year college or university or transfer from one school to another and still use VPEP benefits?
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| A. Yes. Transfers among colleges and universities are permitted, and any unused benefits under the contract can be used at the new college or university or refunded to the account owner. Community college benefits may be applied at four-year colleges or universities, but are not guaranteed to cover the entire cost of
tuition and mandatory fees. |
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| Q. What payment plans are available? |
A. VPEP offers three payment plans:
- A single, lump-sum amount
- A five-year (60 month) payment plan available only for children who have not yet completed the seventh grade
- Equal monthly payments until the child reaches college age. The last payment will be due on May 1st of the year the student is expected to enroll in college
Pricing for each payment option is provided on pages 13-17 of the Enrollment Kit. You may also submit a down payment with your VPEP application. If you make a down payment, it must be submitted with your application and you will need to call the toll-free number, 1-888-567-0540, to arrange for a new customized payment schedule. Remember that if you send in a down payment with your application, it may not initially appear on your statement or coupons as these may be generated before the down payment is credited. Prepayments or additional payments may be made at any time by any number of people as long as the account number accompanies the payment. There is no penalty for prepayments. Any payments in excess of the monthly payment will be applied toward principal. If you want to have your additional payment applied toward future monthly payments to pay the account ahead, you will need to contact us in advance to make this request. Do not attach notes to your check. Contact us at our toll-free number, 1-888-567-0540, at our mailing address, P. O. Box 607, Richmond, Virginia 23218-0607, or by email at vcspinfo@virginia529.com if you have account questions. |
| Q. Why is the total of the monthly payments higher than the lump-sum purchase price? |
| A. Monthly payments include an interest component to take into account the fact that the full contract purchase price is not available for immediate investment on your behalf. This year it is 8 percent. Account owners enrolling in future years may have payments that reflect a different rate, determined annually with new pricing by VPEP's actuaries. However, once you enroll, the imputed interest rate in your contract payments will not change. All refunds include the interest component of your monthly payment. The amount of interest in your monthly payments is invested on your behalf and becomes part of the purchase price of your contract for all future calculations. |
| Q. How do I make payments? |
| A. Choose the payment plan you prefer and indicate your choice on your application. You may make monthly payments by check with a VPEP coupon book or by automatic deductions from your bank account. Please refer to the ACH (automatic withdrawal) form included in the Welcome Kit you will receive after sending in your application for further instructions on this payment method. |
| Q. Why does it cost more to buy a contract for a newborn than it does for an older child? |
A. 
As this chart shows, college costs are projected to increase dramatically over the next 20 years. For older students, it is easier to predict the short-term increases in tuition, and therefore the prices are closer to current tuition costs. Contract prices for younger children take into account 18 to 22 years of tuition inflation, and the pricing is higher to allow for more years of increased costs. |
| Q. How do I find out whether payroll deduction is available where I work? |
| A. You will need to ask your employer if payroll deduction for VPEP is available where you work. Currently, payroll deduction is available in many federal and state agencies, as well as in some local governments. Some large private employers are also participating. If your employer is not participating, have your payroll office call VPEP for more information. |
| Q. May I change payment schedules, for example, from the five-year payment option to the extended monthly payment plan or vice versa? |
| A. Yes. You may change your payment schedule at any time. An administrative fee may be charged as indicated in the Master Agreement. Click here [PDF document, 3.4mb, opens in new window] for details on administrative fees found in the Master Agreement of the VPEP Enrollment Kit. |
| Q. If I select one of the monthly payment plans, may I pay off my contract balance at any time? |
| A. Yes. Your payoff amount will be less than the total of all of your remaining monthly payments. You may call toll free 1-888-567-0540 to request your payoff amount, or access your account online. There is no prepayment penalty. |
| Q. May I make a down payment or extra payments to reduce the amount of my monthly payments or pay my contract ahead? |
A. Yes. You may always reduce the total number of payments on your contract by making a payment larger than your monthly payment or by making extra payments. In addition, with a minimum prepayment of $1,000, you may also choose to lower your monthly payments. There is a $25 fee to change your monthly payments. You will need to complete a refinancing form in order to change your scheduled monthly payments. Unless you notify us in writing to apply additional payments to future monthly payments to pay the account ahead, any extra payments or additional amounts received will be applied to principal. Do not attach notes to your check. You may contact us in three ways:
- By phone, at 1-888-567-0540
- By mail, at
P. O. Box 607
Richmond, Virginia 23218-0607
- By email, at vcspinfo@virginia529.com.
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| Q. Is there a charge for a late payment? |
| A. Yes. The charge for a late payment is $15 or five percent of the monthly payment, whichever is less. The late fee for a lump sum payment is one percent of the outstanding balance per month. A late fee will be assessed if a payment is more than fifteen days late. |
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| Q. What is the federal income tax treatment of a VPEP contract? |
| A. Any earnings on VPEP contracts grow tax free at the federal level, which means that the account owner does not have to pay federal tax on any interest or the increased contract value each year. If the contract is used for qualified higher education expenses, the difference between the purchase price and the amount paid out by VPEP (the earnings) is tax free. Non-qualified distributions, other than those in the event of the beneficiary's death, disability or receipt of a scholarship, are subject to a federal tax penalty of 10% of the earnings. All nonqualified distributions (those not used for qualified higher education expenses), including those made on account of the beneficiary's death, disability and receipt of a scholarship, are subject to federal income tax on the earnings portion of the distribution. The interest will be taxed as ordinary income at the federal level. Federal tax law also provides for favorable estate and gift tax treatment of qualified tuition programs like VPEP. See the "Virginia and Federal Tax Considerations" [PDF document, 85kb, opens in new window] section of the Disclosure Statement for more detailed information about the taxation of VPEP accounts. Please contact your tax adviser concerning the effect of a VPEP contract purchase on your individual tax situation. The Virginia College Savings Plan cannot provide financial, tax or legal advice. |
| Q. Will I have to pay federal gift tax? |
| A. Contributions to a VPEP account must be counted toward your $12,000 annual federal gift tax exclusion. This means that a contribution to any one beneficiary's VPEP account in a single tax year that is greater than $12,000 ($24,000 for married couples) could have federal gift tax consequences. You must also take into account additional gifts, if any, you make to the same individual during the same year. You may also make an election to take advantage of a five-year averaging provision available for Section 529 contributions. Please see the Disclosure Statement for more detailed information on the federal gift and estate tax provisions, and be sure to consult your tax adviser or the Internal Revenue Service for information on how to document any elections that you make. Usually, these elections require you to file an IRS Form 709. |
| Q. What are VPEP's Virginia state income tax advantages? |
| A. All VPEP account owners who have Virginia taxable income and file Virginia income tax returns can deduct from their Virginia taxable income up to $2,000 per year per contract or the amount paid during the year, whichever is less, with unlimited carry forward until the full price of the contract has been deducted. Only the account owner is allowed to deduct contributions to his or her account. If the funds are not used for higher education expenses, or if the account is rolled over to another state's section 529 plan, the account owner must add the deducted amount back to his or her Virginia income for state income tax purposes unless the refund is due to the beneficiary's death, disability or receipt of a scholarship. The $2,000 annual cap does not apply to VPEP account owners who are age 70 or above. They may deduct the entire amount paid for a VPEP contract at one time or in any future tax years. There is also a Virginia state income tax exemption for earnings and interest from a VPEP contract if a refund is made because of the beneficiary's death, disability or receipt of a scholarship. The earnings portion of these refunds is taxed at the federal level, although there is no penalty assessed. The Virginia state tax advantages are only available for investments in Virginia's section 529 qualified tuition programs (VPEP, VEST, CollegeAmerica, and CollegeWealth). If you are a resident of a state other than Virginia, please consult a tax adviser or your state's department of taxation to determine your state's tax treatment of a Virginia 529 account. |
| Q. May I redeem my Series EE or I U.S. Savings Bonds to purchase a VPEP contract without losing any tax advantages for which I may currently qualify? |
| A. Yes. Federal law allows the redemption of Series EE and I U.S. Savings Bonds issued after December 31, 1989, in order to purchase a prepaid tuition contract like VPEP. Please contact your tax adviser or the Internal Revenue Service to determine how the redemption of these bonds will affect you. Additional information on the redemption of these bonds is available on the U.S. Department of the Treasury's web site at www.TreasuryDirect.gov. |
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| Q. What if the student decides not to go to college? |
A. VPEP offers a number of options:- VPEP contract benefits may be transferred to a brother, sister or cousin the same age or younger. Benefits are even transferable to an older sibling or cousin, as long as the older sibling or cousin had not completed the ninth grade at the time the contract was purchased. Depending on the circumstances, a transfer of benefits to another beneficiary may require additional payments.
- Alternatively, you may want to retain your contract because a student has at least ten years after the projected high school graduation date to use the contract benefits. This time period may be extended upon request.
- Another option is to cancel one or more years of the contract. You can do this at any time, even after the student has enrolled in college.
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| Q. If I cancel my contract, may I get back into the program at a later date at the same price? |
| A. No, but you may re-enter the program during future enrollment periods by purchasing a new contract as long as the beneficiary is still eligible. Costs may be higher at the time you reapply, so it is advantageous to remain in VPEP after a contract has been established. Please remember that there is no requirement that future enrollment periods be held. |
| Q. What happens if I cancel a VPEP contract? |
A. An account owner may cancel a contract at any time for any reason and receive a refund of payments made minus any benefits already used. An administrative fee of $25 may also be charged depending on the circumstances of the cancellation. If an account owner has owned the contract for more than three years, VPEP will pay interest at the reasonable rate of return, compounded annually, on the amount of the payments made. If the account owner has owned the contract for less than three years, VPEP will refund the amount of payments made. If the cancellation is for a reason other than the beneficiary's death, disability, receipt of a scholarship, or a rollover to another qualified tuition program, the account owner will be required to pay a federal tax penalty of 10% of the earnings, reported on his or her federal tax return. Federal and state income tax will also be due on the earnings portion of the refund. In addition, any amount of the refund that was deducted from the account owner's Virginia taxable income in prior years must be added back to the account owner's Virginia taxable income in the year the refund is received (unless the refund is due to the beneficiary's death, disability or receipt of a scholarship).
Death or Disability:
If the beneficiary dies or becomes disabled (see the definition of Disabled in the Master Agreement), the account owner will be entitled to cancel the contract and receive a lump-sum refund of payments made plus interest at the reasonable rate, compounded annually. The earnings portion of the refund will be taxed as ordinary income at the federal level and will be exempt from Virginia income tax. In addition, the account owner can change the beneficiary to a member of the family of the current beneficiary who met VPEP eligibility requirements at the time the contract was purchased and avoid paying any tax.
Scholarship:
If the beneficiary receives a scholarship, the account owner may request a refund of payments made plus interest at the reasonable rate of return, compounded annually, capped at the amount of the scholarship. The earnings portion of the refund will be taxed as ordinary income at the federal level and will be exempt from Virginia income tax. In addition, the account owner can roll over the contract to a member of the family of the current beneficiary who met VPEP eligibility requirements at the time the contract was purchased and avoid paying any tax.
Rollovers to another Section 529 qualified tuition program:
VPEP will transfer the payments made plus interest at the reasonable rate of return, compounded annually, to the program designated if the account owner has owned the contract for at least three years. If the contract has been owned less than three years, VPEP will transfer the payments made to date to the new program without interest. However, if the rollover is to a VEST, CollegeAmerica, or CollegeWealth account, VPEP will transfer the payments made plus interest at the reasonable rate, compounded annually, even if the contract has not been owned for three years. You are allowed one rollover per 12-month period without changing the beneficiary on the account. If you roll over your VPEP contract to another state's qualified tuition program, you will have to recapture in your Virginia taxable income any amount of your VPEP payments that you have already deducted from your Virginia taxable income.
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| College-educated workers are more likely than others to be offered pension plans by their employers, the College Board reports |
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