College, Career & ROP Services

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Qualified Education Benefits

Qualified tuition programs (QTPs, also known as section 529 plans because they are covered in section 529 of the IRS tax code) and Coverdell education savings accounts are grouped together in the law as qualified education benefits and have the same treatment: they are an asset of the owner (not the beneficiary because the owner can change the beneficiary at any time) except when the owner is a dependent student,in which case they are an asset of the parent. When the owner is some other person (including a non-custodial parent), distributions from these plans to the student count as untaxed income, as “money received.”

States, their agencies, and some colleges sponsor plans known in the IRS tax code as qualified tuition programs. The IRS mentions two types of QTPs that are commonly called prepaid tuition plans and college savings plans. States may offer both plan types, but colleges may only sponsor prepaid tuition plans.

Prepaid tuition plans allow a person to buy tuition credits or certificates, which count as units of attendance. The number of units doesn’t change even though tuition will likely increase before the beneficiary gets to use the tuition credits. They are an asset of the plan owner, and their worth is the refund value of the credits or certificates.

College savings plans allow a benefactor to deposit money into an account that will be used for the beneficiary’s college expenses. The buyer does not pre-purchase tuition credits as with a prepaid tuition plan. Rather, this type of plan is essentially a savings account and its value as an asset is the current balance of the account.

Coverdell education savings accounts, or ESAs, are another tax-advantaged savings vehicle for college education. They are treated the same as college savings plans: the current balance is an asset of the account owner.

As long as distributions from QTPs and ESAs do not exceed the qualified education expenses for which they are intended, they are tax-free, so they will not appear in the next year’s AGI. They should not be treated as untaxed income (except in the cases mentioned above) or as estimated financial assistance. For more information on these benefits, see the IRS’s Publication 970, Tax Benefits for Education.

UGMA and UTMA Accounts

The Uniform Gifts and Uniform Transfers to Minors Acts (UGMA and UTMA) allow the establishment of an account for gifts of cash and financial assets for a minor without the expense of creating a trust. Because the minor is the owner of the account, it counts as his asset on the FAFSA, not the asset of the custodian, who is often the parent.

Tips for Writing Winning Scholarship Essays

• Start by going through all the scholarships you’re planning to apply for and determining if an essay is required. If you’re not sure, contact the institution awarding the scholarship.
• Make a list of deadlines for the applications, giving yourself a minimum of three to four weeks to work on the essay component.
• Read the essay requirements carefully.
• Approach the essay like you would any major writing assignment, developing a complete outline that includes the key points you want to make and addresses all requirements.
• Compose your essay by detailing each of the key points you’ve included in your outline.
• It’s always difficult to write about yourself. One suggestion is to tell your story out loud to yourself or to someone else who might even jot down notes for you as you speak.
• Write in complete sentences using clear language, watching punctuation and grammar. Never use abbreviations or other shortcuts used in texting or social media.
• Include your academic accomplishments as well as your contributions to your school life and community (including student council, leadership and volunteer activities). Make this more about the services you provided and the personal rewards rather than a bragging session.
• Recite your essay to someone who has also reviewed the criteria so they can help you spot any mistakes or anything you’ve missed.
• Have someone you know that has a good eye proofread the essay before your submit it. This is one case where your grammar and spelling need to be perfect.
• Do a final check to make sure your essay addresses each requirement.
• Ensure the essay and accompanying materials (application, envelopes, etc.) are all correctly addressed and postmarked.
• Save the essay and adjust it as needed so you can re-use it for other applications. Be sure that relevant, key points are added for each application and remove others that aren’t applicable.

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