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College Refunds and Qualified Tuition (529) Plans

John Mason, CFP®

COVID-19 sent college students home early for the Spring 2020 semester.  Colleges and Universities have quickly pivoted to online education and other methods for this semester.  Although some colleges and universities are issuing refunds for tuition, other institutions are not issuing refunds claiming that the costs of delivering these classes has actually gone up. Certain institutions are also reimbursing or refunding certain fees such as housing, dining, healthcare, sports and transportation to name a few.

If you’re like many of our clients, the Spring 2020 semester was paid via a qualified 529 distribution.  If you’re not using a 529 to pay for your dependents private school or higher education, check out our College Expenses, 529s and Tax Credits blog post.

What steps to take if you receive a refund for some or all of the Spring 2020 Semester

  1. Return the refund to the Qualified Tuition (529) Plan

If a beneficiary receives a refund of any qualified education expense from an eligible institution, the beneficiary is not required to include in gross income the portion of the distribution that the beneficiary recontributes to the Qualified Tuition Plan.  The amount must be recontributed no later than 60 days after the date of the refund and the recontributed amount cannot exceed the refunded amount. Any recontributed amount is not treated as a rollover and therefore is considered principal. Click here to read more about this process.

  1. Virginia requires 529 account owners to complete the Virginia 529 Redeposit Request Form which can be found here.

Please contact Virginia 529 at 1-888-567-0540 for more information on how to initiate the redeposit of any refunds received for this semester.  The Mason & Associates team has been in contact with the Virginia 529 Customer Service Team in Richmond several times and they have always been a pleasure to work with.  Mason & Associates has not contacted or confirmed the process for non Virginia 529 Plans but we do believe the process will be similar.

We hope you have a nice Easter weekend.