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Frequently asked questions

Plan details
What's a 529 college savings plan?
Who can open a New York's Direct Plan account?
How do I know which educational institutions are eligible?
Can I use the money for a college outside of New York?
What tax benefits can I get from the Direct Plan?
What are my investment choices?
How do I find information about the performance of the portfolios?

Enrollment
How much do I need to open an account?
Can I open an account for more than one beneficiary?
Can I open an account in the Direct Plan with the money from my child's UGMA/UTMA account?

Account maintenance
How much can I contribute to my account?
Can I move money from one investment option to another?
How do I make withdrawals from the plan and how long does it take?
How soon can I begin making withdrawals after contributing?
Can I rollover money from another 529 plan to the Direct Plan?
What if the beneficiary doesn't go to college?
What are qualified higher-education expenses?

What's a 529 college savings plan?
A 529 college savings plan, typically sponsored by a state, enables you to invest for college deferred from federal and sometimes state income taxes. You can use this investment to pay for tuition, certain room-and-board expenses, fees, books, supplies and equipment, and other qualified higher-education expenses.*

* Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements and certain withdrawals are subject to federal, state, and local taxes.

Who can open a New York's Direct Plan account?
The Direct Plan has no income restrictions and is open to U.S. citizens or resident aliens with:

  • A valid Social Security number or other taxpayer identification number, and
  • A U.S. address (that isn't a post office box).

The beneficiary (or student) must also be a U.S. citizen or resident alien with a valid Social Security number or taxpayer identification number. You don't have to live in New York to participate.

How do I know which educational institutions are eligible?
Generally, if a school has been assigned a federal school code by the Department of Education, it's an eligible institution under Section 529. Search for school or campus codes.

Can I use the money for a college outside of New York?
Yes. The money from your account in the Direct Plan can be used at any eligible postsecondary school in the United States and abroad. This includes most colleges, universities, graduate schools, and vocational schools. You can use the money to pay for:

  • Tuition.
  • Certain room-and-board expenses.
  • Fees.
  • Books.
  • Supplies and equipment required for enrollment or attendance.

What tax benefits can I get from the Direct Plan?
New York State taxpayers can deduct up to $5,000 ($10,000 for a married couple filing jointly) of contributions to their Direct Plan account from their state taxable income each year. This may be subject to recapture in certain circumstances such as rollovers to another state's plan or nonqualified withdrawals. However, contributions are not deductible for federal income tax purposes. Learn more about the tax benefits of New York's 529 Direct Plan. Note: Only the account owner may take advantage of the tax deduction for his/her contributions to his/her account.

To be deductible for the current tax year for New York State income tax purposes, contributions sent by mail must be postmarked by December 31.

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What are my investment choices?
The Direct Plan offers 16 investment choices--3 age-based options that automatically adjust your assets over time to more conservative allocations and 13 individual portfolios that you adjust yourself according to your own investment strategy and risk tolerance. You can select up to 5 investment options per account. Learn more about the Direct Plan's investment options.

Investment returns are not guaranteed, and you could lose money by investing in the plan.

How do I find information about the performance of the portfolios?
To get up-to-date information about the performance of all the investment options offered by the Direct Plan, see the Investment Performance section of our Web site.

To see up-to-date information on the particular portfolios you've chosen, log on to your account. You can view your most recent account balances as well as online versions of your quarterly statements.

How much do I need to open an account?
The minimum amount you need to open an account in the Direct Plan is $25. Contributions after you open an account must be at least $25 ($15 if you're contributing through payroll deduction).

Can I open an account for more than one beneficiary?
Yes. While you can name only one beneficiary for each account, you can open accounts for other beneficiaries. Each account you open requires a $25 initial investment.

Note: The same individual can be the beneficiary of multiple accounts. For example, a father, mother, grandparent, and uncle can each open a separate account for the same child; they can also open separate accounts for another child.

Can I open an account in the Direct Plan with the money from my child's UGMA/UTMA account?
You may use money from a Uniform Gifts/Transfers to Minors (UGMA/UTMA) account to open an account in the Direct Plan or fund additional contributions to an existing Direct Plan account. However, keep in mind that you may incur capital gains taxes from the sale of the assets currently held in the UGMA/UTMA account. (You should consult with a tax advisor before transferring UGMA/UTMA assets to a 529 plan.)

Since any money gifted to a child in an UGMA/UTMA account is irrevocable, the 529 account should be opened as a separate "UGMA/UTMA 529" account. You should consider opening a separate 529 account for the same child if you wish to make additional contributions of non-UGMA/UTMA money. Any money that you contribute to the "UGMA/UTMA 529" account will be considered owned by the child and you will not be able to change the beneficiary of this account.

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How much can I contribute to my account?
You can contribute for your beneficiary until the total balance of all Direct Plan accounts held for that beneficiary reaches $375,000. If more than one account has been opened for the beneficiary, this is the total for all accounts. Once this limit is reached, no additional contributions can be made, but the 529 account(s) can continue to accumulate earnings.

Can I move money from one investment option to another?
Yes. Under the federal rules governing 529 plans, you can change the way your existing assets are invested once per calendar year or whenever the account beneficiary changes. You can change how your future contributions are allocated at any time.

How do I make withdrawals from the plan and how long does it take?
You can make a withdrawal online, by phone, or by submitting a form.

Online or by phone
If you submit your request in good order online or by phone on a business day before 4 p.m., Eastern time, your withdrawal will be processed on that day. Withdrawals requested in good order after 4 p.m. will be processed on the next business day. The money you requested can be sent by check or electronic bank transfer (EBT) if you already have banking instructions set up on your account (for security purposes, this must be established 15 days prior to your withdrawal request).

Form
You can submit a Withdrawal Request Form, which is available for download from the Web site or can be mailed to you upon request. If your Withdrawal Request Form is received in good order on a business day before 4 p.m., Eastern time, it will generally be processed within 3 business days. Allow 10 business days to receive the check.

Withdrawals can also be sent to the educational institution either directly or through New York's Higher Education Services Corporation (HESC). Allow extra time for processing as crediting money to the student's school account may be delayed in periods of heavy volume. You can help expedite the processing of the payment to the school by providing the student's ID number.

Note:

Contributions by automatic investment plan (AIP), electronic bank transfer (EBT), and check will not be available for withdrawal for 7 business days.

The Direct Plan will generate an IRS form 1099-Q in January of the calendar year following the year the withdrawal was made and send it to either the account owner or the beneficiary, depending on who received the withdrawal. Withdrawals sent to the account owner will be reported under the account owner's Social Security number. Withdrawals sent to the beneficiary or educational institution will be reported under the beneficiary's Social Security number per IRS guidelines.

How soon can I begin making withdrawals after contributing?
You can withdraw money at any time, but if the withdrawal includes unprocessed assets, your withdrawal will be held until the recent contribution is collected. Contributions by automatic investment plan (AIP), electronic bank transfer (EBT), and check will be held for 7 business days.

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Can I roll over money from another 529 plan to the Direct Plan?
Yes. Generally, you can roll over your savings for the same beneficiary from an account in one state 529 plan to an account in another state 529 plan without federal tax consequences. However, you can't perform a rollover if such a transfer has already occurred for the same beneficiary within 12 months. Note that there may be state income tax consequences (and in some cases state-imposed penalties) that result from such a rollover. You can also contribute to the Direct Plan by rolling over assets held in education savings accounts and U.S. savings bonds, but you must have documentation about the principal and earnings of the investments for these outside accounts.

What if the beneficiary doesn't go to college?
If the beneficiary doesn't use the money in the account for college, you can:

  • Keep the money in your account and use it later for graduate school or other higher education.
  • Transfer the balance, with no penalty, to another eligible family member (including a parent, step and half sibling, or, in some cases, an in-law) of the original beneficiary. For a complete list of eligible family members, see page 46 of the Disclosure Booklet and Tuition Savings Agreement.
  • Withdraw money for noneducational uses. (Pay taxes and penalties--earnings will be subject to federal income tax and an additional 10% federal income tax, as well as state and local income taxes.)

What are qualified higher-education expenses?
To qualify for federally tax-free withdrawals on earnings*, the money must be used to pay for the beneficiary's qualified higher-education expenses at any eligible institution. These expenses include tuition, mandatory fees, books, supplies, and equipment required for enrollment or attendance; certain room-and-board expenses during any academic period the beneficiary is enrolled at least half-time; and certain expenses for a "special needs" student. See IRS Publication 970 for more detailed information on eligible expenses.

* Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes. Tax and other benefits are contingent on meeting other requirements, and certain withdrawals are subject to federal, state, and local taxes.

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