Thinking about your next chapter but wondering how to pay for it?
Figuring out how to pay for college can seem overwhelming; it’s often the first important financial decision you’ll make. Here are ways students (and their families) manage tuition bills.
Utah Educational Savings Plan (UESP)
A Nonprofit 529 College Savings Program
A 529 college savings plan allows your parents, guardians, grandparents, or others to save money without paying taxes on the earnings when the funds are used for “qualified higher education expenses.” These include tuition and fees; required books, supplies and equipment; and certain room and board costs at any higher education institution that accepts federal financial aid, both in and outside of Utah. The tax benefits may enable you to save more for college. However, withdrawals for non-qualified expenses incur a 10 percent federal tax penalty on earnings.
A UESP 529 account may be opened at any time for a beneficiary with a U.S. Social Security or Tax Identification Number, and anyone (a relative or a friend) may contribute to the account. Regardless of who contributes, the account owner maintains control of the funds. UESP requires no minimum contribution and the account is free to open. To learn more, visit UESP’s home page.
According to the U.S. Department of Education, 15 million undergraduates—more than two-thirds of college students—receive some form of federal financial aid. The federal government, some state governments, and educational institutions award financial aid to help students pay for college. Financial aid usually takes the form of loans, grants, or work-study jobs.
You may wonder whether having a 529 plan affects your ability to obtain financial aid. Not everyone can save the full price of tuition for a four-year degree, and having some money saved in a 529 plan does not affect your eligibility to receive aid.
When determining eligibility for financial assistance, the Office of Federal Student Aid evaluates the “expected family contribution,” or EFC, which is based on the parents’/guardians’ and student’s income and assets. If your parent/guardian owns a 529 plan, only 5.64 percent of its value is considered when calculating EFC.
Financial aid in the form of loans must be repaid, usually after graduation, and loan requirements vary. Be sure to research your options and shop around for the best interest rates, fees, and repayment options. Grants, on the other hand, do not have to be repaid. Work-study opportunities are usually part-time jobs that help pay a portion of tuition.
For federal financial aid, it’s best to apply early because awards are made on a first-come, first-serve basis. Visit www.fafsa.gov for deadlines and check out the list of resources at the bottom of this page to learn more.
A scholarship is an award earned through achievement—academic, athletic, leadership, or other merit—to pay for college. Any funds received need not be repaid as long as you complete the scholarship requirements. Full scholarships are rarer than partial scholarships.
If you have a 529 savings plan and receive a scholarship, a “non-qualified withdrawal” may be made from the account—up to the amount of the scholarship—without incurring the 10 percent federal penalty tax on the earnings. Earnings may be subject to federal and state income taxes, but that would be the case if you saved for college using a traditional investment, money market account, or savings account, plus you would have had to pay taxes on the earnings each year rather than after making a non-qualified withdrawal.
Another alternative when you receive scholarship funds but have a 529 savings account is to change the 529 account’s beneficiary to another family member, or to transfer the money to the account of a relative, a sibling perhaps. You also may opt to leave remaining funds in the account to help pay for graduate school expenses.
Answers and Information
If you have questions you would like answered, or need additional information, please call 800.418.2551. Representatives are available to answer your questions by phone on regular business days from 8:00 a.m. to 5:00 p.m., Mountain Time. You may also visit UESP’s home page to learn more.
A website that allows you to search for colleges and scholarships, and complete online applications.
College Savings Plan Network’s blog
An informative blog about 529 college savings plans, found on CSPN’s website. CSPN works to improve 529 plans at the federal and state level and serves as a clearinghouse of information.
Consumer Financial Protection Bureau
A guide to help you choose a loan that’s right for you
FAFSA Online Application
The first step toward federal financial aid
Federal Student Aid Office
A guide to understanding federal financial aid
Step Up to Higher Education
A website to help Utah high school students prepare for college.