VHEIP Frequently Asked Questions
Q. Who can open a Vermont Higher Education Investment Plan Account?
Q. How much can I contribute to the Plan?
Q. Can I contribute to more than one investment option?
Q. What education expenses can the money in the Account be used for?
Q. How are my contributions invested?
Q. What if my child decides not to go to a postsecondary institution?
Q. Can ownership of the Plan be transferred from one individual to another?
Q. How is the money taxed when it is withdrawn?
Q. If I have an Account, will my child still be eligible for financial aid?
Q. How will I be kept informed about my Account?
Q. Is there a cost for opening or maintaining an Account?
Q. Can custodians for minors under the Uniform Gifts to Minors Act open Accounts in the Plan?
Q. Who can open a Vermont Higher Education Investment Plan Account?
A. Anyone who resides in the United States can open an Account for a specific beneficiary, regardless of the Account owner's or beneficiary's state of residence.
A. The Plan is managed on behalf of the state of Vermont by the Vermont Student Assistance Corporation (VSAC), a public nonprofit corporation established by the Legislature in 1965 to provide Vermont residents with the information and financial resources they need to pursue education or training beyond high school. VSAC is the investment manager for the Interest Income Option, which is distributed by Teachers Personal Investors Services, Inc., and TIAA-CREF Individual & Institutional Services, Inc. TIAA-CREF Tuition Financing, Inc. (TFI), is the investment manager for the Managed Allocation Option and the 100% Equity Option and is the program administrator for the Interest Income Option. TFI is part of TIAA-CREF, a New York-based financial services organization with more than 80 years of experience and over $250 billion in assets under management.
Q. How much can I contribute to the Plan?
A. You can open an Account with a minimum investment of just $25 by check or money order, or through an automatic payment plan from your bank account. You can also open an Account with just $15 per Account per payroll period if you establish payroll deduction with your employer. There is no annual maximum contribution, but you may only contribute to your Account if, at the time of your contribution, the total balance of all Accounts for your beneficiary does not exceed the maximum Account balance limit of $240,100. Your Account may continue to grow beyond this limit based on the performance of the investment option(s) you've selected. Note that annual contributions exceeding certain limits may be subject to federal gift tax. See separate question below.
Q. Can I contribute to more than one investment option?
A. Yes. You may direct future contributions into any one or any combination of the three investment options. However, you may not transfer funds already invested among investment options.
Q. What education expenses can the money in the Account be used for?
A. Funds from an Account can be used to pay for qualified higher education expenses at any college, university, vocational school, or other postsecondary institution that is eligible to participate in the student aid programs administered by the U.S. Department of Education. This includes most U.S. schools and some abroad. Qualified higher education expenses include tuition, fees, supplies, books, equipment, and certain room and board expenses that are required for the student to attend school.
Q. Do I have to establish a separate Account for each beneficiary for whom I might wish to contribute?
A. Yes. Each Account can have only one Account owner and one beneficiary. You can, however, open separate Accounts for as many different beneficiaries as you wish. If there are multiple Accounts for a single beneficiary, you may contribute to your Account if, at the time of your contribution, the total balance of all such Accounts for the beneficiary does not exceed $240,100.
Q. How are my contributions invested?
A. Under the Vermont Higher Education Investment Plan, you have three different ways to invest your contributions. The Plan's core investment, the Managed Allocation Option, will be directed into special investment portfolios based on the age of the beneficiary. These portfolios blend stocks, bonds, and money market mutual funds. TIAA-CREF Tuition Financing, Inc., (TFI) is the Program Manager for this Option. As with all equity investments, principal and returns will vary and are not guaranteed. Two supplemental investment options are also available. Under the Interest Income Option, the value of your Account is a general obligation of VSAC, supported by its full faith and credit. Rates of return will vary according to the changes in the 91-day U.S. Treasury Bill index. The 100% Equity Option provides a blend of domestic and international stock mutual funds that, depending on performance, may produce above-average returns over the long term. Given the higher volatility of this option, the risk of loss is greater, particularly over a shorter investment horizon.
Q. What if my child decides not to go to a postsecondary institution?
A. If the initial Account beneficiary does not use the money, it can be transferred to an eligible family member of the original beneficiary without penalty. Such transfer is not considered a taxable event. But if the money is returned to the Account owner, earnings will be taxed at the Account owner's rate and subject to an "additional tax" (paid by Account owners through their federal income tax returns) of 10 percent on the earnings portion of withdrawals not used for qualified higher education expenses. Please see the Plan Disclosure Booklets for further details.
Q. Can ownership of the Plan be transferred from one individual to another?
A. Yes. An Account owner can re-assign ownership of his/her Account. When setting up an Account, it is recommended that the Account owner designate a contingent owner who can assume responsibility for the Account in the event the Account owner dies or is not legally competent to manage the Account.
Q. How is the money taxed when it is withdrawn?
A. Earnings on withdrawals are exempt from federal and Vermont income tax when used to pay for qualified higher education expenses. Please see the Plan Disclosure Booklets for further details.
If you make a withdrawal for any reason other than for qualified higher education expenses the earnings portion of the withdrawal is subject to both Vermont and federal income taxes. In addition, there is an "additional tax" (paid by Account owners through their federal income tax returns) of 10 percent on the earnings portion of withdrawals not used for qualified higher education expenses.
Q. If I have an Account, will my child still be eligible for financial aid?
A. Your eligibility for financial aid will depend on your family's financial circumstances at the time you apply for assistance, as well as on the policies of the government agencies, school, or private organizations to which you apply for financial assistance. Because saving for college will increase the family's financial resources available to the student, it might have some effect on your student's financial aid eligibility. Financial aid policies vary at different institutions and can change over time. We cannot say with certainty how the federal aid programs, or the college to which your student applies, will treat savings under this Plan.
According to the legislation establishing VHEIP, VSAC treats savings in the Vermont Plan as a parent -- rather than a student -- asset when eligibility for state grants is determined. This is done to encourage families to save for college and reduce the impact of VHEIP funds on the expected family contribution. Currently approximately 5 percent of parental assets is considered when VSAC calculates the expected family contribution versus 20 percent of student assets. Consequently, while the savings may reduce eligibility for a Vermont grant, the reduction will be less than if the asset were considered belonging to the student.
Q. If I have an Account, will our family be able to invest in an Education IRA or claim federal higher education tax credits?
A. Contributions made in the same year to both an Education IRA and the Vermont Higher Education Investment Plan are permitted. In addition, the same expenses cannot count toward multiple education tax benefits, e.g. tax-free treatment from the Plan and the Hope or Lifetime Learning Credit. Please see the Disclosure Booklets for further details. For more information about tax credit eligibility, consult IRS publication 970.
Q. How will I be kept informed about my Account?
A. You will receive quarterly and annual statements reflecting activity in your Account, and an annual report. A separate statement will also be mailed for each transaction made to the Account (quarterly statements will be provided for periodic payment plans such as payroll deduction).
Q. Is there a cost for opening or maintaining an Account?
A. You pay no application fees, sales charges, or annual fees for your Vermont Higher Education Investment Plan Account. The Managed Allocation Option and 100% Equity Option charge an asset-based management fee of 0.80 percent of the average daily net assets of the Managed Allocation Option and the 100% Equity Option to maintain the Account.
Q. Can money from another qualified state tuition plan be rolled over to an Account in the Vermont Higher Education Investment Plan?
A. Yes. Vermont's Plan will accept rollovers from another qualified state tuition plan. You can also roll over funds from the Vermont Plan to another qualified state tuition plan.
Q. Can custodians for minors under the Uniform Gifts to Minors Act open Accounts in the Plan?
A. Yes, but such Accounts will be subject to various restrictions. Please see the Disclosure Booklets for more information.
Q. Are contributions to a Vermont Higher Education Investment Plan Account subject to federal gift taxes?
A. Contributions that exceed certain limits may be subject to a federal gift tax. An Account owner may contribute up to $12,000 per year on behalf of a beneficiary without incurring a gift tax. (The annual limit is $24,000 for married couples.) An Account owner who wants to contribute more than $12,000 in a single year may elect to treat contributions up to $60,000 ($120,000 for married couples) per beneficiary as having been made over a five-year period. No tax will be due as long as the owner doesn't exceed the $60,000 limit during the five-year period. Note that these limits apply to the total of all gifts made by a single owner on behalf of a single beneficiary in a given year. So, if an Account owner contributes to multiple investments on behalf of the same beneficiary, the gift tax may be triggered when total contributions exceed $12,000 for one year or $60,000 for five. Although a gift tax return is required for gifts in excess of the $12,000 annual exclusion, lifetime gift tax exemptions apply that may or may not eliminate any gift tax liability. Even though the Account owner maintains control over the Account, amounts in an Account generally are not included in the Account owner's gross estate for federal estate tax purposes. Please see the Disclosure Booklets for further details.
A. Accounts are not insured by the State of Vermont, VSAC, TIAA-CREF, Tuition Financing, Inc. (TFI), Teachers Insurance & Annuity Association and its affiliates; and neither the State of Vermont nor TFI and its affiliates guarantee the principal deposited or the return on investments. The Plan doesn't guarantee admission to any school, that the beneficiary will receive a degree, or that contributions and earnings will be sufficient to cover all qualified higher education expenses. You should read the Participation Agreements and the Disclosure Booklets carefully for additional risks and other information before you apply for the Plan.
A. Call 1-800-637-5860 and ask for an enrollment kit. The kit includes everything you need to establish an Account under the Vermont Higher Education Investment Plan. To open an Account and begin making contributions, you should:
- Decide which of the Options you want to contribute to: the Managed Allocation Option, the Interest Income Option, the 100% Equity Option, or a combination of the Options. The kit contains information about all three Options.
- Read the Disclosure Booklets and Participation Agreements for the Option(s) you select. Then complete the appropriate Participation Agreement and mail it, with a check for your first contribution, in the enclosed business reply envelope.
To download application materials, click this link, Apply Today.
To request an enrollment kit, click this link, Request Information.
The tax information herein is not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding tax penalties. It was written to support the promotion of the Vermont Higher Education Investment Plan. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.
Consider the investment objectives, risks, charges and expenses before investing in the Vermont Higher Education Investment Plan. For details on the Managed Allocation Option, 100% Equity Option, and the Interest Income Option, refer to the Disclosure Booklet (PDF). Read the information carefully.
Before investing in a 529 plan, you should consider whether the state you or your designated beneficiary reside in or have taxable income in has a 529 plan that offers favorable state income tax or other benefits that are only available if you invest in that state's 529 plan.
TIAA-CREF Individual & Institutional Services, LLC member NASD and SIPC distribute securities products.
The State of Vermont, VSAC, TFI, Teachers Insurance and Annuity Association of America and its affiliates do not insure any Account or guarantee its principal or investment return. Account value will fluctuate based upon a number of factors, including general financial market conditions.
