FAQs: Managing your account
- Using your 529 money
- How can I use the money in my account?
- Can I move money from the Direct Plan to an ABLE Plan account?
- Do I have to use my savings at a New York college or university?
- How do I know which educational institutions are eligible?
- Is paying off a student loan a qualified expense?
- How can I contribute to my account?
- Who can contribute to an account?
- How can friends and family members contribute to my account?
- If I choose to mail a check, when will my contribution be invested in the plan?
- If I make a contribution via bank transfer, when will it be invested?
- If I set up recurring contributions (also known as an automatic investment plan or AIP), when will my contributions be invested?
- What kinds of accounts can I use for recurring contributions or bank transfers?
- Can I set up recurring contributions or a bank transfer using assets from a mutual fund?
- Can I recontribute refunds that I receive from a college or university?
- Making withdrawals
- How soon can I begin making withdrawals?
- How do I make withdrawals from the plan?
- How long do withdrawals take?
- What tax forms will I receive when I make a withdrawal?
- Changing beneficiaries
- Can I change the beneficiary?
- What happens if the beneficiary doesn't want to continue his or her education?
Using your 529 money
How can I use the money in my account?
Your account can be used for any purpose. However, to qualify for federal tax-free withdrawals on earnings, the money must be used for qualified higher education expenses for the beneficiary as described below.*
Qualified higher education expenses at eligible educational institutions include tuition, fees, books, supplies, and equipment required for enrollment or attendance; the purchase of certain computer equipment, software, internet access, and related services, if used primarily by the beneficiary while enrolled at an eligible educational institution; certain room and board expenses during academic periods in which the beneficiary is enrolled at least half-time; and certain expenses for students with special needs.
Federal law also allows 529 plan account owners to withdraw assets to pay for expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school (K–12 tuition) up to $10,000 per year per beneficiary beginning in 2018 with no resulting federal taxes on account earnings or penalties.
Under New York State Law, distributions for K–12 tuition are considered nonqualified distributions and require the recapture of any New York State tax benefits that have accrued on contributions. Direct Plan Account Owners in other states should seek guidance from the state in which they pay taxes.
*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. In addition, withdrawals used to pay expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school are subject to recapture of any New York State tax benefits that accrued on contributions. We encourage account owners to consult a qualified tax advisor. The availability of tax or other benefits may be contingent on meeting other requirements.
Can I move money from the Direct Plan to an ABLE Plan account?
Beginning in 2018, account owners can also roll over 529 plan assets into ABLE plan accounts, subject to the annual ABLE plan contribution limit, until December 31, 2025. Rollovers of 529 plan assets into ABLE plan accounts will not be considered taxable events for purposes of New York State taxes. For more details about the Direct Plan's tax benefits, refer to the Disclosure Booklet and Tuition Savings Agreement.
Do I have to use my savings at a New York college or university?
No. The money in your account may be used at any eligible higher-education institution in the United States and abroad that qualifies under federal guidelines.
This includes most public and private colleges and universities, graduate and postgraduate schools, community colleges, and certain trade and vocational schools.
How do I know which educational institutions are eligible?
If a school's been assigned a federal school code by the U.S. Department of Education, then it's an eligible institution under Section 529 of the Internal Revenue Code.
Is paying off a student loan a qualified expense?
No. Repayment of student loans isn't considered a qualified higher-education expense. (See "How can I use the money in my account?" above for examples of qualified higher-education expenses.)
How can I contribute to my account?
You can contribute by:
- Electronic bank transfer (one-time contributions in varying amounts from your checking or savings account).
- Recurring contributions (also known as an automatic investment plan or AIP), which are set amounts moved from your checking or savings account on a regular basis.
- Payroll deduction (through participating employers only).
- Check (made payable to "New York's 529 College Savings Program Direct Plan").
- Rollover from another 529 plan.
- Transfer from an education savings account or a Series EE or I U.S. savings bond.
- Transfer from a Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) account.
We don't accept contributions made in cash or by credit card, third-party personal checks over $10,000, foreign checks not in U.S. dollars, checks dated more than 180 days prior to receipt, or postdated checks.
We also don't accept non-cash assets, such as mutual fund shares or other securities.
Note: Contact your tax advisor to find out the tax implications related to various contribution methods.
Who can contribute to an account?
Anyone can contribute, not just the account owner. Contributions by check must be made payable to "New York's 529 College Savings Program Direct Plan," and include your account number (if you're not the account owner, make sure that you have the correct account number for the beneficiary). You'll also need to download and complete an Additional Purchase Form and send it with your check.
Note: Only account owners are eligible for the New York State income tax deduction, if applicable, on contributions they make to their accounts.
How can friends and family members contribute to my account?
Sign up for Ugift—Give College Savings* and link your Ugift account to your Direct Plan account. You can then invite friends and family to contribute to your account by sharing a special Ugift code on Twitter or by email. Gift-givers can use that code to make online contributions to Ugift, which will be transferred on a regular basis to your Direct Plan account. Ugift also provides printable gift coupons that you can distribute in person or by mail. The coupons are coded so that when they're mailed in with contribution checks that money will be deposited into the correct Direct Plan account.
*Ugift is a registered service mark of Ascensus Broker Dealer Services, Inc.
If I choose to mail a check, when will my contribution be invested in the plan?
If your check and instructions are received in good order on a business day when the New York Stock Exchange (NYSE) is open, and prior to its close (generally 4 p.m., Eastern time, Monday through Friday), your contribution will be processed with the current date as the trade date. If your check is received after the close of the NYSE, it will be processed using a trade date of the following business day.
Note: All checks should be made payable to "New York's 529 College Savings Program Direct Plan."
If I make a contribution via bank transfer, when will it be invested?
If your bank transfer is received in good order on a business day when the New York Stock Exchange (NYSE) is open, and prior to its close (generally 4 p.m., Eastern time, Monday through Friday), you'll receive that day's trade date. Your purchase will be made at that day's closing price for units of the applicable portfolio. Your bank account will be debited on the business day following the trade date.
If your bank transfer is received in good order after the close of the NYSE, you'll receive a trade date of the next business day. Your bank account will be debited on the business day following the trade date (i.e., the second business day after your request date).
If I set up recurring contributions (also known as an automatic investment plan or AIP), when will my contributions be invested?
Your bank account will be debited on the day you designate, provided that day is a regular business day. If the day falls on a weekend or a holiday, the debit will occur on the next business day. Your Direct Plan account will be credited on the business day preceding the day the bank debit occurs.
The first recurring contribution debit must be at least three days from the date your request is received. Quarterly recurring contributions will be made every three months on the date you indicate, not by calendar quarter.
If you don't indicate a date, the recurring contributions will be made on the 20th of the month.
What kinds of accounts can I use for recurring contributions or bank transfers?
You can use a personal checking or savings account held with a U.S. financial institution that is a member of the Automated Clearing House (ACH) network.
You can't use a passbook savings account for recurring contributions or an electronic transfer option. Generally, money market accounts aren't eligible.
Can I set up recurring contributions or a bank transfer using assets from a mutual fund?
No. Most mutual fund companies aren't members of the ACH network.
Can I recontribute refunds I receive from a college or university?
Yes. If your beneficiary receives a refund from an eligible educational institution for money paid for qualified higher-education expenses, you may recontribute the refund to the account for which he or she is a beneficiary. The money must be recontributed within 60 days after the date of the refund and can't exceed the refunded amount.
How soon can I begin making withdrawals?
You may make withdrawals at any time, taking into consideration the following guidelines:
- Contributions you make by check, recurring contributions, or electronic bank transfer will be available for withdrawal after seven business days.
- If you request a withdrawal by check at the same time you change your mailing address, the withdrawal will be held for nine business days.
- If you add or change bank information, you need to allow 15 days for withdrawals by electronic transfer.
How do I make withdrawals from the plan?
Withdrawals can be requested online by logging onto your account, by phone, or by submitting a Withdrawal Request Form.
Qualified higher education withdrawals for attendance at eligible educational institutions can be sent to:
- The account owner.
- The beneficiary.
- The eligible educational institution.
Withdrawals for K-12 tuition cannot be sent directly to the beneficiary or the educational institution. We will only send withdrawals for K-12 tuition to the account owner.
All other withdrawals (i.e. nonqualified withdrawals) can be sent to:
- The account owner.
- The beneficiary.
How long do withdrawals take?
If your withdrawal request is received in good order on a business day when the New York Stock Exchange (NYSE) is open, and prior to its close (generally 4 p.m., Eastern time, Monday through Friday), it will be processed with that day's trade date. Withdrawals received in good order after the close of the NYSE, will receive the next business day's trade date.
If you request the proceeds by check, they will typically be mailed to the recipient within three business days after the trade date. Allow ten business days for the check to be received.
If you request that the proceeds be sent to you electronically, you'll need to have banking information set up 15 days prior to making the request. Note: No matter how you receive the proceeds, allow extra time during periods of heavy volume, as crediting the student's account may be delayed.
Also keep in mind that during periods of market volatility and at year-end, withdrawal requests may take up to five business days to process.
What tax forms will I receive when I make a withdrawal?
We'll generate a Form 1099-Q in January of the calendar year following a year in which there was a withdrawal from the account. The recipient of the 1099-Q will be either the account owner or the beneficiary, depending on who received the proceeds of 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 to an educational institution will be reported under the beneficiary's Social Security number, per IRS guidelines.
Can I change the beneficiary?
You can change the beneficiary on your account at any time, provided that the new beneficiary is an eligible family member of the original beneficiary. An eligible family member is a:
- Brother, sister, stepbrother, or stepsister.
- Son, daughter, stepson or stepdaughter (or descendant of either).
- Father or mother (or an ancestor of either).
- Stepfather or stepmother.
- Son or daughter of a brother or sister.
- Brother or sister of the father or mother.
- Son-in-law, daughter-in-law, brother-in-law, sister-in-law, father-in-law, or mother-in-law.
- Spouse, or the spouse of any individual previously listed.
- First cousin.
You can also find this list of eligible family members in the Disclosure Booklet and Tuition Savings Agreement.
What happens if the beneficiary doesn't want to continue his or her education?
If that's the case, you have three options:
Stay invested. You can leave the money in the account in case the beneficiary decides to attend school later. There's no age limit for using the money.
Change the beneficiary. You can change the beneficiary on your account at any time, provided that the new beneficiary is an eligible family member of the original beneficiary
Refer to the list of eligible family members under the previous question, "Can I change the beneficiary?", or in the Disclosure Booklet and Tuition Savings Agreement.
Withdraw the money for other uses. A 10% federal penalty tax on earnings will apply if you withdraw money for any reason other than to pay qualified higher-education expenses. Exceptions to this penalty include a withdrawal made because the beneficiary:
- Has died or become disabled.
- Received a scholarship, to the extent the withdrawal amount doesn't exceed the scholarship amount.
Has enrolled in an eligible U.S. military academy, to the extent that the amount of the withdrawal doesn't exceed the value of the education. Eligible academies include the U.S. Military Academy, Naval Academy, Air Force Academy, Coast Guard Academy, and Merchant Marine Academy.
Additionally, any accumulated earnings that are withdrawn from your account must also be reported on the recipient's income tax return for the year in which they're distributed, and you may owe federal, state, and local income taxes.
Contact your tax advisor to determine how to report a nonqualified withdrawal.