Q: How can I use the funds in my CollegeAmerica account?
A: You can use the assets in your CollegeAmerica account to pay for the beneficiary’s qualified higher education expenses. Earnings withdrawn for any use other than qualified higher education expenses are subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. However, a withdrawal on account of the beneficiary’s death, disability or receipt of a scholarship (to the extent of the scholarship award) is subject to federal income tax but no federal tax penalty.
Q: What is considered a qualified higher education expense?
A: Qualified higher education expenses generally include:
- mandatory fees
- textbooks, supplies and required equipment
- room and board during any academic period during which the beneficiary is enrolled at least half-time in a degree, certificate or other program that leads to a recognized educational credential awarded by an eligible educational institution
- special needs services for a beneficiary with special needs
Paying off a student loan is NOT considered a qualified expense.
Q: What is an eligible educational institution?
A: Most community colleges, public and private 4-year colleges, universities and vocational schools in the United States are eligible educational institutions. Some foreign institutions are also eligible. To find out if a school is eligible, go to the Department of Education’s website.
Q: Who is responsible for determining that a withdrawal was made for qualified higher education expenses?
A: The account owner or the beneficiary makes the determination and must retain appropriate documentation to show that a withdrawal was made for qualified higher education expenses.
Q: Can I use my CollegeAmerica assets to pay for graduate school?
A: Yes. You can use the assets for undergraduate and graduate school as well as specialized training, such as medical school or law school.
Q: Can I pay tuition at a private elementary or high school with my CollegeAmerica assets?
A: CollegeAmerica is designed to pay higher education expenses. Therefore, a withdrawal used for tuition at a private elementary or high school will be subject to federal income tax and a 10% federal tax penalty on earnings.
Q: Is there a minimum number of credit hours that the beneficiary must take in order to use CollegeAmerica funds?
A: There is no minimum level of study. If, however, the student is enrolled on a less than half-time basis, withdrawals for room and board will not be considered qualified higher education expenses.
Q: Is there a time limit for using the assets in a CollegeAmerica account?
A: Yes. The account owner must use the assets in the account or designate a new beneficiary within 30 years after the beneficiary graduates from high school or within 30 years after opening the account, whichever comes later. Requests for an extension of this time limit will be considered on a case-by-case basis.
Q: Must the beneficiary attend school in Virginia?
A: No. The account owner can use a CollegeAmerica account to pay for qualified higher education expenses at an eligible educational institution in any state.
Q: Can my withdrawal be sent to my bank account?
A: Yes. You can have a withdrawal transferred to the checking or savings account linked to the CollegeAmerica account. This transaction may take place online, over the phone, or by mailing us a completed CollegeAmerica Distribution Request Form (PDF). Direct deposit withdrawals requested online are limited to $25,000 per day. Payments will be deposited into your bank account within three business days of the transaction date. Use the FundsLink® form (PDF) to link a bank account. A signature guarantee may be required.
Q: Can my withdrawal be sent to an educational institution?
A: Yes. You can call us to redeem up to $125,000 per day from a CollegeAmerica account and have the money sent directly to an eligible educational institution. We’ll need the name and address of the institution when you call.
Q: When making a withdrawal from my CollegeAmerica account, will it be reported under the Social Security number of the account owner or of the beneficiary for tax purposes?
A: It depends on to whom the distribution is made payable. If the withdrawal is made payable to the account owner, then the tax reporting will be under the account owner’s Social Security number. If withdrawals are made payable to the account beneficiary or to the school, then the tax reporting will be under the beneficiary’s Social Security number.