School Refund Headed Your Way?
If your student was unable to finish his/her college semester on campus due to the impacts of COVID-19, you might be receiving a refund for dormitory, meal plan, or other expenses from the school. Please check with your student’s school to learn how the institution will be handling any potential refund of qualified higher education expenses. Each institution will determine the best way to handle this process; scenarios could include the funds being automatically deposited into the student’s school account, funds being credited back to a credit card if it was used to make the payment, or a check being mailed.
There are several options available if the funds paid from a qualified tuition program, such as the Stanley G. Tate Florida Prepaid College Program or Florida 529 Savings Plan, are returned to you or the student:
- The funds may be used to pay other qualified higher education expenses incurred by the student during 2020. If not used towards 2020 qualified higher education expenses, the earnings portion of these funds may be subject to tax.
- In order to avoid any tax ramifications, the funds may be returned/recontributed to a qualified tuition program, but you cannot return more than you were refunded by the school. For example, if you receive a refund related to housing, then:
- Partial Refund – You may choose to recontribute the funds into a Florida 529 Savings Plan account for future use by the student. This option is available whether you have received a partial refund of Prepaid Plan dormitory expenses or whether you had previously made a withdrawal from your Florida 529 Savings Plan to cover housing and / or meal plan expenses.
- Full Refund – You may choose to recontribute the funds back to the Prepaid Plan or Florida 529 Savings Plan account for future use by the student. Please note that Prepaid Plan dormitory benefits are offered on a semester basis; therefore, a full refund is required to restore a semester to a dormitory Prepaid Plan.
- The funds must be recontributed within 60 days after the date of the refund. Due to the extenuating circumstances surrounding COVID-19, the IRS has extended the time to recontribute recent refunds – to the greater of 60 days after the refund date or July 15, 2020.
All Account Owners should keep track of records relating to their 529 Plan, qualified higher education expenses, and related refunds and consult with their financial, tax, or other advisor regarding their individual situation.