529 college savings plans are named after the section of the tax code that describes them. Qualified withdrawals from these plans are free of federal, and in most cases, state taxes. The sooner you open an account, the more time your money has to grow.

Vermont’s official 529 plan is the Vermont Higher Education Investment Plan (VHEIP).

VHEIP is the only 529 college savings plan that offers Vermonters exceptional tax breaks on state taxes, as well as federal taxes. State tax benefits include:

• an income tax credit on contributions
• an income tax exemption on earnings

For more information:

Visit www.vheip.org

Call 800-637-5860

 

• Replaces the Hope credit for tax years 2009 and 2010
• Available for the first four years of college study (as compared to two years for the Hope credit)
• Student must be enrolled at least half time and pursuing an undergraduate degree or other recognized credential.
• The credit is for up to $2,500 per year per student.
• Begins phasing out if adjusted gross income is $80,000 for single filers and $160,000 for joint filers. Not available to single filers with an adjusted gross income of more than $90,000 ($180,000 for joint filers). These income limits are higher than those under the earlier Hope credit and the existing lifetime learning credit.
• For guidelines, see IRS Publication 970.

 

• The credit is for up to $2,000 per tax return.
• Covers all students in the household per year for qualified higher education expenses incurred during any year of postsecondary study or for courses used to acquire or improve job skills.
• Begins phasing out if adjusted gross income is $50,000 for single filers and $100,000 for joint filers. Not available to single filers with an adjusted gross income of more than $60,000 ($120,000 for joint filers).
• You cannot claim both an American opportunity credit and a lifetime learning credit for the same student in the same year.
• Middle-income parents who may not qualify for American opportunity and lifetime learning credits are able to deduct up to $4,000 of college tuition expenses annually from their annual income for federal tax purposes. See “tuition and fees deduction" below or consult IRS Publication 970 for guidelines.

 

• Reduces your income for federal income tax purposes.
• Enables individuals to deduct from their taxable income up to $4,000 of qualified higher education expenses for themselves, their spouses, and their dependents.
• Cannot be used in the same year that an American opportunity or lifetime learning credit is claimed.
• Families eligible for a tax credit may wish to explore that option first because a credit reduces taxes owed dollar for dollar, whereas a deduction reduces only taxable income. However, the deduction may be an option for families that don’t meet the income guidelines for a tax credit. Either way, it’s important to compare all the tax benefits available to you and to use the one that provides the most generous savings.

 

• Yearly allowable contribution limit: $2,000.
• If Congress does not act, the maximum contribution per beneficiary will revert to $500 annually after December 31, 2010.

A grant is an outright gift of money that usually doesn’t need to be repaid — thus, it’s sometimes referred to as “gift aid."

Most grants are based on a family’s level of financial need.

Grants are available from:

• the federal government
• the state government

The Vermont Legislature designates a certain amount of money every year for grants for eligible Vermont students who apply. These Vermont grants are administered through VSAC.

Vermont grants are available for:

full-time study

part-time study

non-degree study (to improve employability or try out a college course)

• colleges

Many colleges put aside a certain amount of money each year for students who apply for financial aid. Check the college catalog, financial aid handbook, or Web site for information on availability and application procedure.

Learn more

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Scholarships do not need to be repaid.

Unlike grants (based solely on financial need), scholarships are competitive. Applicants must meet specific eligibility requirements, and must compete against others who may meet these requirements.

No two scholarships are alike. Scholarships may be based on many different criteria, including the following and/or others:

• financial need
• residency (the particular state, county, or town in which a student lives)
• affiliation with a particular community group or organization
• extracurricular activities, including community service or clubs
• anticipated field of study

REMEMBER: Scholarships are NOT simply for academic or athletic stars. Colleges often award “merit scholarships" to attract a diverse group of students:

• perhaps for students from states not highly represented at the school
• perhaps for students with a family history, talent, or particular circumstance that few other students at the school have

Check with admissions offices at the schools you’re applying to; ask if they offer this sort of aid.
Learn more

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