Uncertain what some terms mean? Find explanations of key terms here.
A tax-advantaged plan created pursuant to Section 529 of the Internal Revenue Code to help families save for the qualified higher education expenses, including K-12 tuition expenses, of a beneficiary.
The document the account owner submits to open a my529 account. my529 offers four account types. Each account type has a separate account agreement.
- Individual account. Individual Account Agreement (form 100)
- Institutional account. Institutional Account Agreement (form 102)
- UGMA/UTMA account. UGMA/UTMA Account Agreement (form 104)
- Scholarship account. Scholarship Account Agreement (form 106)
A fee assessed against the total funds in an account as a percentage of the account value. See also Underlying Fund Expense below.
The person designated on the Account Agreement for whom a my529 account is being opened and whose qualified higher education expenses, including K-12 tuition expenses, will be paid from the account.
Customized Investment Option
One of three investment option types offered by my529. An account owner or agent who invests in a Customized Investment Option takes full responsibility to design his or her customized asset allocation from the available underlying investments.
Eligible Educational Institution
Any accredited college, university, or trade school in the United States or abroad that is qualified to participate in federal financial aid programs for students. Find a list of participating schools, updated quarterly, at the U.S. Department of Education federal student aid site .
Public, private, and religious kindergarten through 12th grade schools.
Enrollment Date Investment Option
One of three investment option types offered by my529. Enrollment Date investment options are built from a mix of Vanguard mutual funds, the PIMCO Interest Income Fund and FDIC-insured accounts. Enrollment Date options take into consideration the target year the account beneficiary will begin taking withdrawals to pay for qualified education expenses. Over time, the options gradually shift to a more conservative investment allocation as the target enrollment year draws closer. See Underlying Funds or Underlying Investments below.
my529 offers a FDIC-Insured investment option. my529 also offers investment options that include FDIC-insured accounts as underlying investments. The FDIC-Insured investment option, and the FDIC-insured accounts, are held in trust by my529 at Sallie Mae Bank and U.S. Bank. Money in these accounts is insured by the Federal Deposit Insurance Corporation (FDIC) on a pass-through basis to each account owner at each bank up to $250,000 at each Bank. The amount of FDIC insurance provided to an account owner is based on the total of (1) the value of an account owner’s investment in the FDIC-insured accounts at each bank, plus (2) the value of other accounts (if any) owned by the account owner and held at each bank, as determined by the banks and FDIC regulations.
Limited Power of Attorney (LPOA)
An account owner can grant an entity or individual LPOA authority to access my529 account(s) and to perform certain transactions on his or her behalf.
Member of the Beneficiary’s Family
A member of the beneficiary’s family can be the beneficiary’s:
- Father or mother
- Brother or sister
- Legally adopted child
- Stepfather or stepmother
- Stepson or stepdaughter
- Brother-in-law or sister-in-law
- Son-in-law or daughter-in-law
- Father-in-law or mother-in-law
- Son or daughter of a brother or sister
- Beneficiary’s spouse
- Spouse of any of any people mentioned above
- First cousin
Net Asset Value (NAV)
NAV represents the daily price of a unit of an investment option, and is calculated after the close of market trading on each business day (normally 4 p.m. ET). It is derived from the daily value of underlying investments in an investment option and the daily accrual of asset-based fees.
Qualified Education Expenses
Expenses qualified for tax-free account withdrawals include:
- Tuition, fees, books, supplies, and equipment required for a beneficiary to enroll or attend an eligible educational institution, such as a college, university, or vocational school.
- Computers, peripheral equipment, educational software, and internet access and related services when used primarily by the beneficiary while enrolled at an eligible educational institution.
- Room and board for a beneficiary who is enrolled at least half time at an eligible educational institution. The expense may not exceed the cost determined by the eligible educational institution for on-campus room and board.
- Expenses for services for a special needs beneficiary to enroll and attend an eligible educational institution.
- K-12 tuition expenses at public, private, or religious schools. Payments for K-12 tuition expenses cannot exceed a combined total of $10,000 per calendar year per beneficiary from all qualified tuition programs, including my529.
- Payments on qualified education loans. This includes amounts paid—as principal or interest—on any qualified education loan of the beneficiary, or a sibling of the designated beneficiary. Withdrawals for loan repayments are limited to a total of $10,000 from all 529 accounts. Distributions to a sibling also have a $10,000 limit. However, the account owner cannot use 529 funds to repay a qualified loan and then use those same 529 funds to claim a tax deduction for student loan interest.
- Costs for registered apprenticeships, including fees, books, supplies, and equipment required for participation. To qualify, apprenticeship programs must be registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act.
The process of moving account funds into preset target underlying investment allocations because of the beneficiary’s age. Reallocation of funds applies only to Customized Age-Based investment option. It does not apply to fixed investment options. A reallocation does not count as an investment option change.
The process of buying and selling underlying investments to return the account to the target asset allocation for that investment option.
An amount withdrawn from a qualified 529 plan and deposited within 60 days in another qualified 529 plan for the benefit of (1) the same beneficiary, or (2) a different beneficiary who is a member of the beneficiary’s family.
A stable value fund focuses on preserving principal and providing liquidity while generating steady returns for my529 account owners saving for higher education. The fund invests in high-quality government and corporate bonds with short- and intermediate-term maturity dates.
Static Investment Option
One of three investment option types offered by my529. The option maintains the same underlying investment allocation for the life of the account.
Underlying Funds or Underlying Investments
Based on the investment option selected for an account, my529 invests account contributions in a combination of The Vanguard Group or Dimensional Fund Advisors funds, the PIMCO Interest Income Fund and the FDIC-insured accounts that my529 holds in trust at Sallie Mae Bank and U.S. Bank. These investments are referred to as underlying funds or underlying investments. The account owner does not own these underlying investments. See Unit below.
Underlying Fund Expense
An asset-based fee that is charged by Vanguard, Dimensional and PIMCO for each underlying investment. Returns on the underlying investments are net of the Underlying Fund Expense for each applicable underlying investment.
A UGMA/UTMA account is funded with money gifted or transferred to a beneficiary under the Uniform Gifts to Minors Act/Uniform Transfers to Minors Act. UGMA/UTMA account funds are under the control of a person who is at least age 18 who is not the beneficial owner and who will transfer the funds to the beneficiary when that person reaches the age of majority.
Ownership interests in investment options issued by the my529 trust. Account owners do not own shares of the underlying investments.