Benefits & Distributions

Benefits & Distributions

Now that the future is here, learn how to start using your 529 College Savings Plan.

You’ve planned ahead, helped them cram and crossed your fingers that the big envelope would arrive. And now that it has, you’re ready to start using your Maryland Prepaid College Trust benefits or taking a distribution from your Maryland College Investment Plan! Using your plan is just as simple as it was to start it. Just choose your plan to find out how:

Maryland Prepaid College Trust

Maryland College Investment Plan

These frequently asked questions should be read in conjunction with and are limited by the full Enrollment Kit.  Many terms used in this section are defined in the Enrollment Kit.

Maryland Prepaid College Trust

ALERT! Attention Maryland Prepaid College Trust Account Holders: The tranisition of program management for the Maryland Prepaid College Trust to Intuition College Savings Solutions, LLC is complete.  Current Account Holders will need to register their Account for online Account access.  Click here to begin the process or download the Registration Guide for step by step instructions.

To claim Benefits, you will need to submit a request by selecting Benefit Claims from the Benefits tab after logging in at maryland529.com/prepaid-login. Be sure to have your invoice on hand as you will need to provide specific details about the Qualified Higher Education Expenses for which you are requesting a Benefits Claim payment.

Once you have submitted your benefit claims request, you will receive an email to confirm the submission. Allow up to 3 - 4 days for mailing of your benefit claims payment and then you can verify your transaction by accessing your Account online and selecting Claims History from the Benefits tab.

Still uncertain about how to request benefits? Below are answers to several Frequently Asked Questions that can help!

Submitting Your Claim / Processing Your Claim / Amount of Tuition Benefits / Where Can I Use Benefits / Tax Reporting / General Questions

Submitting Your Claim:

How do I claim benefits from my Prepaid College Trust Account?

Claiming your Benefits is simple. Just log in to your Account online, provide the information from the invoice detailing the Tuition and Mandatory Fee charges for your student and upload a copy of the invoice and any other required documents, for our records. Once you submit your request, we will do a quick verification and then process the Benefits claims payment to your requested recipient.

How do I submit my completed Benefits Claim Form?

First, obtain a copy of your student’s invoice, log in to your Account, then complete the following 4-steps to submit your request.

  1. Enter the invoice information
  2. Confirm the recipient
  3. Upload your invoice and supporting documents
  4. Confirm the information for submission.

After that, we just need up to 3 -4 days to verify your request and process the payment.

How do I get an invoice from my student’s college to include with my Benefits Claim Form?

Most college students are able to access their invoice through their college’s website using the same portal they use to register for classes and view their grades. Typically, students can retrieve their invoice as soon as they complete their registration. Alternatively, some colleges allow students to designate other individuals – such as their parents – as authorized users on their account. In this case, the authorized user would simply log into their student’s account to access the invoice. If you need further assistance getting a hold of this document, please contact your student’s college.

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Processing Your Claim:

When will my claim be processed?

We do our best to give you access to your Benefits as quickly as possible. Currently, our office needs up to 3 - 4 days to verify and process a benefit claims request.

What happens if my Benefits Claim Form is not completed correctly or is missing documentation?

If your request does not include the required supporting documents and/or does not match the invoice submitted, we will contact you and request the additional documents required to process your request. In some cases where the original Benefits Claims request is confirmed as invalid, the Account Holder is then responsible for submitting a new Benefits Claim request and any required supporting documents.

How can I confirm that the Prepaid College Trust has processed my benefits payment?

After we’ve processed your documents (typically up to 3 -4 days after submission), you can check your Benefits payment information online:

Additionally, the Benefits Claims payment will be sent to your requested recipient along with a stub confirming your basis and earnings information.

How are checks mailed?

Once your documents are processed, we’ll mail your Benefits check as quickly as possible. Checks payable to an Account Holder or student will be mailed to his or her address of record. Checks payable to your student’s college will be mailed directly to the school. To change an address of record, simply log in to your Account.

Why does the Prepaid College Trust mail checks for benefits? Isn’t it easier and faster to send my benefits by electronic funds transfer?

Mailing checks for Benefit payments is the only payment option supported at this time. However, we are working to be able to offer electronic payments as a future enhancement.

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Amount of Tuition Benefits:

What will the Prepaid College Trust pay when my student attends college?

For a Beneficiary enrolled as a full-time student, we will pay Benefits based on the plan you purchased.

University Plan:

  • If your student attends a Maryland public 4-year college, we will pay the full in-state Tuition and Mandatory Fees for up to 15 credit hours each semester at that college, or your Minimum Benefit, whichever is greater, for the number of contract semesters/years purchased.
  • If your student attends a 4-year Eligible Institution that is a private or out-of-state college, we will pay the actual Tuition each semester (or the equivalent) up to one half of the annual Weighted AverageTuition for the University Plan, or your Minimum Benefit, whichever is greater, for the number of contract semesters/years purchased.

Community College Plan:

  • If your student attends a Maryland public 2-year community college, we will pay the full in-county Tuition and mandatory Fees for up to 15 credit hours each semester at that college, or your Minimum Benefit, whichever is greater, for the number of contract semesters/years purchased.
  • If your student attends an Eligible Institution that is a Maryland public 4-year college or a private or out-of-state 2-year or 4-year college, we will pay the actual Tuition each semester (or the equivalent) up to one half of the annual Weighted AverageTuition for the Community College plan, or your semester Minimum Benefit, whichever is greater, for the number of contract semesters/years purchased.
I purchased a University Plan and my student has decided to attend a Maryland community college. What will my Benefit be?

You may use your University Plan toward the community college Tuition, or convert your University Plan to a Community College Plan.

If you choose  to use your University Plan toward the community college Tuition and Mandatory Fees, we will pay the Tuition and Mandatory Fees up to the greater of one half of the annual Weighted AverageTuition of the University Plan or your semester Minimum Benefit. If Tuition is less than the Weighted Average Tuition, you would have remaining Excess Benefits available to apply toward future Qualified Higher Education Expenses.

For example, assume the annual Weighted Average Tuition for the university plan is $9,000 for the Academic Year or $4,500 per semester. Assume also that the Tuition and Mandatory Fees at your student’s community college is $1,800 per semester. The Trust would pay the $1,800 Tuition for the semester and you would have used 40% of your benefit for that semester ($1,800/$4,500). You would then have 60% of your benefit for that semester remaining, plus the full second semester that you could use toward future Qualified Higher Education Expenses.

If you decide to convert your University Plan to a Community College Plan, just complete sections 7 and 9 of the Account Maintenance Form and log in to your Account online to upload the completed form for processing. Make sure that you convert your plan before submitting a Benefit Claim request, as we will not be able to convert your plan once benefits payments have been distributed (see the Benefits section of the Disclosure Statement).

Is there a minimum number of credits that my student must take in a semester in order for me to use my Prepaid College Trust Account?

To receive Benefits, your student has to be enrolled in at least 6 credit hours or half-time enrollment at most colleges, but this is defined by the college and not by the Prepaid College Trust. If your Beneficiary attends a Maryland public college, private college or out-of-state college as a half-time student, the Trust will pay one-half of the benefit available to a full-time student per semester. (See: What will the Prepaid College Trust pay when my student attends college?).

The remaining one-half of Excess Benefits may be requested for other Qualified Higher Education Expenses for the same semester or used to pay Tuition and Mandatory Fees and/or Qualified Higher Education Expenses for a future semester.

Can I use Benefits for summer or winter term courses?

If you have Excess Benefits in your Account, your Beneficiary can apply them to summer or winter term courses, as long as they’re enrolled as at least a half-time student.

What is Weighted Average Tuition?

For four-year Maryland public colleges, the Weighted Average Tuition is calculated by multiplying the Tuition and student population at each college, adding those figures together, and then dividing by the total student population across all four-year public colleges in the University of Maryland System.  That gives us average Tuition weighted toward the actual student populations at each school. Note that there is a separate calculation for the 4-year public colleges and the 2-year public community colleges in Maryland. Also, the Weighted Average Tuition is calculated annually, typically in the early summer for the following Academic Year, and remains in effect for the entire Academic Year.

What is the Weighted Average Tuition for the current Academic Year?

The Weighted Average Tuition for the 2021-2022 Academic Year is $10,027.48 for the University Plan and $4,824.74 for the Community College Plan

Verify the current Weighted Average Tuition at any time by selecting My Benefits from the Benefits tab once you log in to your Account.

What is considered a Maryland Public College?

The following are the eligible Maryland Public Colleges and Universities that are paid as part of in the Prepaid College Trust in-state Tuition benefit:

Is there a minimum amount the Prepaid College Trust will pay?

Yes, but the minimum amount is determined by the amount you paid in to your Account. Your Minimum Benefit is the payments made under your Contract, minus Operating Expenses, plus a certain rate of return. See Article V – Benefits of the Disclosure Statement for more details.  

If Tuition and Mandatory Fees is less than your Minimum Benefit, you can use the difference for other Qualified Higher Education Expenses like books or room and board.

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Where Can I Use Benefits:

Can I use my Prepaid College Trust Account if my student decides to attend a private or out-of-state college?

As long as the college is an Eligible Institution, meaning that it meets the definition of Eligible Educational Institution as defined by the IRS, you can use your Account to fund your student’s private or out-of-state education. You can confirm that a school is an Eligible Educational Institution by searching for its Federal School Code at www.fafsa.ed.gov.

Can I use my Prepaid College Trust Account if my student decides to attend a trade or technical school?

Trade or technical programs cannot be funded by Benefits from your Prepaid College Trust Account. However, the Maryland College Investment Plan can be used for qualified trade or technical schools and your Prepaid Trust Account can be rolled over to the MCIP for that use. In addition, refunds from your Prepaid Trust Account are available, though unqualified distributions are subject to certain taxes and penalties.  See Article VI – Rollovers and Refunds of the Disclosure Statement for further details.

How can I use my Prepaid College Trust Account if my student chooses to study outside of the U.S.?

As long as your student chooses to study internationally through a U.S.-based college that is an Eligible Educational Institution, and that college is invoicing you for Tuition and Mandatory Fees in U.S. dollars, the Trust will pay your Benefit just as if your student was studying right here in the United States. However, if your student chooses to study abroad through a U.S.-based college, but the college arranges for another company to invoice you for Tuition, the Trust cannot pay your benefit since that company is not an Eligible Educational Institution.

In addition, some universities located outside of the U.S. have received U.S. accreditation, meaning you can use your Benefits to cover your student’s expenses at these institutions as well. You can confirm if an overseas school has U.S. accreditation by searching for its federal school code at www.fafsa.ed.gov.

What if a Maryland public college does not offer the major or program that my student wishes to study?

Maryland participates in a program called the Academic Common Market, in which, under certain conditions, a student may qualify for in-state Tuition for select programs at out-of-state public colleges. You can learn more about this program here.

Whether or not your student qualifies for in-state tuition at an out-of-state college through the Academic Common Market, we will still pay Benefits based on your student’s attendance at an out-of-state college.

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Tax Reporting:

What kind of tax form will I receive for my claimed benefits?

When you start using your Benefits or request any refunds from your Account, you’ll need to start reporting them on your taxes. An IRS Form 1099-Q that combines all of your claimed Benefits from the prior calendar year will be mailed by January 31st (or February 1st if January 31st falls on a weekend or holiday) of the following year .

You are responsible for preparing and filing the appropriate forms when completing your federal income tax return and for paying any applicable tax directly to the IRS. The taxable party is the Beneficiary unless the distribution is issued to the Account Holder.

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General Questions:

What if my beneficiary delays college attendance?

Your Beneficiary has up to 10 years after his or her projected year of college enrollment to begin to use Benefits. Any years spent in active U.S. military service are added to the 10-year limit.

What if my beneficiary does not choose to pursue higher education?

If your Beneficiary decides further education is not in their future, you still have several options for your Account:

  • Keep your Account, since your Beneficiary may choose to attend college at a later date within the 10-year period following their projected year of college enrollment.
  • Name a new Beneficiary for your Account. Learn more about this in Article VII -  Substitutions of the Disclosure Statement.
  • Request a rollover (to the Maryland College Investment Plan or another 529 plan) or refund. Have a look at Article VI – Rollovers and Refunds of the Disclosure Statement for more information.

Remember, if all Benefits have not been used within the designated time period, your Account will be terminated. See Article VIII – Termination of the Disclosure Statement for additional information.

Can I submit a Benefits Claim Form by mail?

To ensure accuracy and to expedite Benefits processing, we have transitioned the Benefits Claims process to an online-only format.  We are happy to assist you in the online Benefits Claim request process. Call us at 1-888-4MD-GRAD (463-4723) and selecting option 2, then option 2.

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Maryland College Investment Plan

You can request a distribution from your Maryland College Investment Plan account simply by logging into your account. You can also call 1-888-4MD-GRAD (463.4723) or complete and submit a Distribution Request Form. For more information about distributions, review the Distributions from Your Account section in your College Investment Plan Disclosure Statement.

Have other questions? Get answers when you review the below FAQs.

Requesting a Distribution / Eligible Expenses and Institutions / Tax Reporting / General Questions

Requesting a Distribution:

How can I receive a distribution?

You get to choose how you’d like to receive your distribution. If you’d like it by check, we’ll mail it to you 1-2 days after your transaction is processed. If you’d prefer an electronic deposit, we’ll place the funds directly into your or the student’s on-file bank account in one of the following ways (your choice):

  • Automated Clearing House (ACH): Generally received 2-3 business days after your distribution is processed.
  • Wire transfer: Generally received 24-48 hours after your distribution is processed. Please note that your bank may charge you a fee to accept a wire transfer.
If I request a distribution by check, who can I have the check made payable to?

Distributions by check can be made payable to one or more of the following payees:

  • account holder
  • beneficiary
  • eligible educational institution for the benefit of the beneficiary
  • beneficiary and eligible educational institution jointly
  • estate of beneficiary
  • Distribution checks for K-12 must be made payable to the account holder or the beneficiary, not the K-12 institution.

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Eligible Expenses and Institutions:

What are Qualified Education Expenses?

Qualified education expenses are generally all the things you need to successfully attend an eligible college, graduate, trade or technical school. Also, effective January 1, 2018, education-related expenses have been expanded to include tuition expenses used for K-12 education. The total amount of elementary and secondary school tuition expenses considered to be qualified is limited to $10,000 per year per Beneficiary. These expenses are defined by the IRS and typically include the following:

  • Tuition, fees, and the costs of textbooks, supplies and equipment required for enrollment or attendance of a student at an eligible educational institution.
  • Certain costs of room and board of a student for any academic period, during which the student is enrolled at least half-time at an eligible educational institution.
  • Expenses for “special needs” students that are necessary in connection with their enrollment or attendance at an eligible educational institution.
  • Expenses for computers and peripheral equipment (e.g., printers), computer software, and Internet access, when such items or services are used primarily by the Beneficiary during any of the years the Beneficiary is enrolled at an eligible educational institution

Remember that student loan expenses are not considered by the IRS to be qualified education expenses.

What is an Eligible Educational Institution?

An eligible educational institution generally refers to a school that is an accredited post-secondary educational institution or vocational school that offers credit toward a bachelor’s, associate’s, graduate or professional degree, or another recognized post-secondary credential. The institution also has to be eligible to participate in a federal student financial aid program.

You can usually find out if a school is an eligible educational institution by searching for its federal school code at fafsa.ed.gov. In addition, the Maryland College Investment Plan can now be used to pay for tuition expenses at K-12 public, private, and parochial schools (FAFSA codes are not assigned for K-12 schools).

If you pay state taxes in a state other than Maryland, you may have to pay state income taxes on K-12 distributions. Consult your tax professional for more information.

Can I use my College Investment Plan for trade or technical schools?

Yes. As long as the school meets the requirements of an eligible educational institution, you can use distributions from your College Investment Plan for all your student’s qualified education expenses.

Can I use my College Investment Plan for study abroad expenses?

If your student studies abroad, you may be able to use your account just as you would for schools in the U.S. As long as your student chooses to study through a U.S.-based institution that is an eligible educational institution, and that institution invoices you for a  qualified education expense, then you can use your account to fund your student’s education abroad.

In addition, some universities located outside of the U.S. have received U.S. accreditation, meaning you can use your distributions to cover those qualified education expenses as well. You can usually find out if an overseas school has U.S. accreditation by searching for its federal school code at https://fafsa.ed.gov

Are there any distribution limits to using a Maryland College Investment Plan account to pay for tuition expenses at a K-12 public, private, or religious school?

Yes. Distributions for K-12 tuition expenses are limited to $10,000 per year per beneficiary across all accounts. While federal taxes do not apply to distributions used to cover K-12 expenses, state taxes may apply.

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Tax Reporting:

What kind of tax form will I receive for my distribution?

Maryland 529 will generate an IRS Form 1099-Q that reports the distribution and the recipient.

The Beneficiary’s Social Security number (SSN) will be used for tax reporting unless the check is payable to the Account Holder, in which case the Account Holder’s SSN will be used. However, the Form 1099-Q does not report whether the distribution is a Qualified Distribution or a Non-Qualified Distribution. The Account Holder is responsible for making that determination and retaining records to support the type of distribution that was taken.

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General Questions:

Can I take a distribution for expenses already paid?

There is limited guidance provided by the IRS regarding the timing of distributions pertaining to qualified expenses. You may wish to speak with a tax advisor regarding your particular situation.

How long does money have to be invested before I can take a distribution?

You can take a distribution from your account any time you like. Just remember that when you make a contribution to your account, that amount may be held for up to 10 days before it can be distributed.

How much money can I take out? Is there a minimum that I have to keep in the account?

We want you to take your distribution when you need it, so, you can take out as much as you like, with no minimum balance. 

How often can I take a distribution? Can I take my money out before the year associated with my Enrollment-Based Portfolio?

There’s usually no limit on how often you can take a distribution, and distributions can be taken at nearly any time, regardless of the year associated with your enrollment-based portfolio.

How can I take a distribution from my Account?

You can request a distribution at any time via online access, by phone, or by completing the Distribution Form.

Simply log in to your Account to request a distribution online. Select “Distribute” from the “Start a Transaction” drop down menu. You will have the option to send a check made payable to yourself directly to your address of record or electronically to your existing bank account on file. Funds may also be distributed payable to the Beneficiary and sent to the Beneficiary’s address of record, or to a Beneficiary’s bank on file.

Distributions payable to the Eligible Educational Institution (or jointly to the Beneficiary and Eligible Educational Institution) must be requested by phone or by using the Distribution Form at this time.

Distributions payable to the Estate of Beneficiary must be requested using the Distribution Form.

Any distribution request of $50,000 or more requires the Distribution Form and will also require a Medallion Signature Guarantee.

Distribution checks for K-12 must be made payable to the Account Holder or the Beneficiary, not the K-12 institution.

It is important to note that tax reporting is dependent upon the payee of the distribution. If the distribution is made payable to the Account Holder, the tax reporting will be issued under the Account Holder’s Social Security number and mailed to the Account Holder’s address on file. All other distributions will be reported under the Beneficiary’s Social Security number and the tax form will be mailed to the Beneficiary’s address on file.

When will my distribution be processed?

We do our best to give you access to your distribution as quickly as possible.

Online distributions appear as pending transactions in your Account immediately. Distribution Forms received in good order are processed the day they are received, if they are received on a business day, or the next business day if they are received on a holiday, weekend, or other non-business day. Funding is then sent via check or electronically the next business day (if the distribution is processed prior to 4 pm EST).

You have two options for receiving your distribution electronically to a bank on file (offered when the payee is the Account Holder or Beneficiary):

  • Automated Clearing House (ACH): Generally, you should receive the distribution in your bank account 2-3 business days after it is processed.
  • Wire transfer: Generally, you should receive the distribution 1-2 business days after it is processed. Please note that your bank may charge you a fee to accept a wire transfer.

Need more information on Distributions? Visit the Account Holder Benefits and Distributions Resource Page.

Will my automatic monthly contributions (AMC) or payroll deductions end if I take a distribution?

Your AMC or payroll deductions will continue until you let us or your payroll department know you’d like them to stop. To modify or cancel your AMC, call us at 1-888-4MD-GRAD (463.4723) or log into your online account. To modify or cancel payroll deductions, please contact your payroll department.

What if my beneficiary does not choose to pursue higher education?

If your beneficiary decides further education is not his or her ideal path, you still have several options for your College Investment Plan:

  • Keep your account, since your beneficiary may choose to attend college or an eligible trade or technical school at a later date.
  • Name a new beneficiary for your account. Learn more about this in your Plan Disclosure Statement, as certain transfers can be made to a qualified family member without incurring income tax consequences.
  • Take a distribution of all or part of your account assets, but remember that the IRS may treat your refund as a non-qualified distribution, making it subject to applicable taxes and penalties.

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