Key Terms

Uncertain what some terms mean? Find explanations of key terms here.

 

529 plan
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.

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Account Agreement
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)

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Age-Based Investment Option
One of three investment option types offered by my529. The allocation of money in the underlying investments depends on and changes with the age of the beneficiary or college enrollment. See Underlying Funds or Underlying Investments below.

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Asset-Based Fee
A fee assessed against the total funds in an account as a percentage of the account value. See also Operating Expense Ratio below.

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Beneficiary
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.

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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.

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Eligible Educational Institution

Any accredited college, university, or trade school in the United States or abroad that participates in federal financial aid programs for students. Visit Free Application for Federal Student Aid (FAFSA) at fafsa.ed.gov for a list of participating schools.

Public, private, and religious kindergarten through 12th grade schools.

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FDIC-Insured Accounts
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 (collectively Banks). 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 the maximum account set by federal law, which is $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.

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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.

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Member of the Beneficiary’s Family

A member of the beneficiary’s family can be the beneficiary’s:

  • Father or mother
  • Brother or sister
  • Grandparent
  • Child
  • Grandchild
  • 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

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Operating Expense Ratio
An asset-based fee that is charged by Vanguard and Dimensional for each underlying investment. Returns on the underlying investments are net of the Operating Expense Ratio for each applicable underlying investment.

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Qualified Higher 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 special-needs services required by the beneficiary to enroll or attend an eligible educational institution.
  • K-12 tuition expenses at public, private, or religious schools

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Reallocation
The process of moving account funds into preset target underlying investment allocations because of the beneficiary’s age. Reallocation of funds applies only to age-based or customized investment options. It does not apply to fixed investment options. A reallocation does not count as an investment option change.

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Rebalancing
The process of bringing the underlying investments of an account back into a targeted or stated investment allocation.

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Rollover
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.

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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.

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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 Public Treasurers’ Investment 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.

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UGMA/UTMA Account
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.

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Unit
Ownership interests issued by the my529 trust corresponding to underlying fund positions held by the my529 trust. Account owners do not own the underlying funds.

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Unit Price
The price of a my529 unit is determined by the value of the respective underlying funds. The value of each unit is calculated after the close of market trading on each business day (normally 4:00 p.m., Eastern Time).

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