Please note that this transcript was auto-generated. We apologize for any minor errors in spelling or grammar.

[00:00:00] Once again, I really wanna thank you for coming to our U Plan question and answer webinar that we have. This is the first time that we’ve ever actually done this presentation, um, and, um, uh, really excited about it. ’cause I love the U plan. I worked with the U plan in many years, for many years, and I, I still do, and we’re sort of in the, in the middle of peak EU plan season, and I’ll explain why.

Um. Just, just a quick answer in the q and a section. Um, say yes, if you actually have a u plan account or no, if you don’t, just so I know, um, you know, how many of you are familiar with the program and how many of you are not.

Okay. All right, so we got. Everybody who’s answered so far. Okay. [00:01:00] Most people who have answered, um, have a you plan. Some people don’t. Some people have a, you fund a Fidelity plan, which is great ’cause I know that we’ll, um, I knew we were gonna have questions about 5 29 plan because we always, we always do the plan’s very similar and they sound alike.

So, before I get started, actually I am gonna share my screen really briefly just to introduce myself. And, um, you know, I, I, I apologize for the, uh, clumsy way I’m gonna do this ’cause I have not really ever figured out how to do this, uh, in a good way. Um. But my name is Jonathan Hughes. I am the Associate Director of College Planning and Content Creation at MEFA.

I’ve worked at MEFA for over 20 years, and a lot of that time I’ve spent specifically working, uh, with the U Plan as part of my job. So, um, you know, for all of you who don’t have a U plan and you’re curious about it, maybe confused about it, I was confused about it for the first few years that it worked with me, [00:02:00] but I didn’t really.

I wanna know much about it ’cause it seemed confusing to me. And once I got to know the program, I really, really liked it. And, and, you know, we worked internally with all the accounts at that time. So when people called up with their u plan questions, uh, they were speaking to me on the phone or one of my colleagues and we could see their accounts.

So I’m, I’m. Pretty familiar with the program. It’s changed somewhat since then, and it’s, it’s gone up to, um, be serviced by US Bank, which has allowed us to really expand a lot of the things that we were able, um, to offer, which is, which is a great thing. This is about your questions and answers, so I know many of you may have submitted questions already, which I will answer.

Um, but. You know, we have an hour here to talk about any questions that you may have. Feel free to submit those through the q and a and I will answer those as as I go. But, um, I do wanna start off quickly by talking about nefa NIFA’s, the [00:03:00] Massachusetts Educational Financing Authority. And we’re a state authority created back in 1982 by the Commonwealth of Massachusetts, uh, to help families to plan, save, and pay for college.

And, you know, what we were initially created to do was to offer a loan. I’m gonna turn myself up here. What we were initially created to do is to offer a loan. Um, and that is something that we still do. We have a, an education loan. However, you know, since 1982, as the cost of college has continued to go, go up, um, you know, simply offering that loan is not gonna be enough for us anymore.

So we created these two savings programs, the U plan and the U Fund. The U plan actually was the second. Prepaid tuition program in the country. And so, um, it predates the youth fund, the 5 29 plan. It predates any 5 29 plan really. ’cause that wasn’t created until a few years ago. So I’m sure I said before, I’m weirdly proud of the youth plan, but I really, really do like the youth plan and I think it’s a great [00:04:00] program.

Uh, so it is really key in helping us to do what we are meant to do, which is to, to help families to, to save for college and. So, yeah. All right. So good. We got some questions in here already and I think what I wanna do first is just explain briefly how the U Plan works. There are those who do not have, uh, a U plan and basically it is a prepaid tuition program.

It allows you to prepay up to 100% of tuition and mandatory fees at participating colleges in Massachusetts. Um, and how the program works is it’s open all year round. You can. Put money in, open an account. Um, whenever you are able to do so, you can put a lump sum of money in. You can have money automatically taken from your, uh, a bank account every month or every couple of months or however often you wanted to do it.

And that money is managed now again by US Bank and it [00:05:00] sits in a money market fund accruing some interest, um, but. Every year we do a bond purchase. And so, um, that bond purchase occurs end of July, beginning of August, and so around July 15, you have them until about July 15th to, to put funds into your account this year.

Then we’re gonna have a closeout period between July 15th and, and. The beginning of August when we do the bond purchase and then you can sort of open it again. And what we do is we take all of the funds that we receive throughout the year and then buy bonds. So when you put money into the U plan, um, you’re not investing in the market, you’re investing in.

General obligation bonds that are backed by the full faith and credit of the Commonwealth. And I know we had a question already about what the difference is between the U Fund and the U plan and that is a big difference right there in the U fund. You are invested in the market and the U plan, you’re not [00:06:00] right, it, it’s, it’s invested in these general obligation bonds.

But the real point of the U plan program is not just to invest in the bonds, but it is to prepay, uh, a percentage of this year’s tuition. I. For, for tomorrow’s, um, costs. So let’s say you put in a thousand dollars this year. Well, that’s gonna buy 10% of a, a tuition, uh, I’m sorry. It’s gonna buy 10% of tuition at a college that costs $10,000 this year.

And let’s say you put that money in for 15 years from now when your child is, is going to college. Well, by the time he goes to that college, if indeed he goes to that college or she goes to that college. That college has increased from 10,000 to 20,000. Well then you have 10% of that. ’cause you purchased 10% of tuition.

So you have $2,000 now. So your $1,000 became $2,000 because tuition, it doubled because tuition has doubled. So your investment keeps pace [00:07:00] with the increase in tuition. So in order to buy a you plan bond, you need at least $300 in your account. You can open an account with less than $300, but if you don’t have at least 300 in there by the time we do the bond purchase, um, then it’s your money will just stay in the, um, US bank account and it will, you know, you can continue to add to it in the following year.

And then if you have $300, it would buy a bond per it would buy a certificate for the following year. Um, so the question always becomes, and somebody’s already asked it already, right? What happens if a child ends up not going to a participating college or university? And what happens in that case? Um, you have a, a few different options and this is just a visual sort of representation here, um, of you putting in a certain amount of money.

Let’s say it’s a $1,000 that’s gonna buy 20% [00:08:00] of tuition and fees at a college that costs $5,000 or 10% at a college that costs 10,000 or 4% at a college that costs 25,000. You don’t pick the college when you invest. Um, that comes later and, and we’ll get to that. Um, so. If the child ends up not attending a participating college or university in the program, uh, you have a couple of options.

You can transfer those funds over to another beneficiary within the family, or you can hold on to them for up to six years and case you think the, the student might change their mind and attend one of those colleges, or you can cash out and get what you put in plus the interest. And so your bond interest accrues at CPI.

It gets assessed every August. And what that is depends on the year. And so when you cash out those funds, when they mature, you get what you put in [00:09:00] plus that CPI interest back. Um, so, uh, I think that that’s important to note. Um. Somebody wants to know, I have a Fidelity 5 29 for my daughter. Do you suggest I roll it into a U fund?

Uh, can that even be done? Uh, you plan. Um, I, I, I think, uh, is what you meant, but, um, we can’t accept rollovers into the U plan. Um, so that that would not be done. And I, I’m not a, an advisor in that way, so I wouldn’t really suggest that you do that. Um. It. But, but let me, actually, there’s, there’s a couple of questions already about the difference between a fund and a U plan.

So I can go right to that. Um. I just wanna show you a list here of participating U Plan colleges and universities. Somebody else had a question that they had sent in about, you know, what happens if they don’t go to a public college, but go to a private college, and that’s [00:10:00] a popular misconception. You can see there were about 70 participating programs in the U plan.

Colleges in the U plan, they’re all in Massachusetts, so they’re to be used at a college in Massachusetts that participates. But it’s not just public colleges or universities. There’s private colleges there as well. And so, I’m gonna leave this up here a little bit. Um, the list of colleges has stayed fairly static throughout the years.

Again, I’ve been working with the U plan since about 2004. Um, and I haven’t seen. Um, much change. There have been a few colleges that have left the program, um, and they did not leave the program ’cause they don’t like the program. They’ve, they’ve closed as colleges or they’ve emerged with other colleges.

Um, or one, one or two colleges have become. For-profit colleges, in which case, um, we are not able to, [00:11:00] uh, to continue on if the college decides to, if a college decides to leave the program, um, they are contractually obligated by signing the U Plan agreement with Mefa to honor the cer, the certificates that were purchased.

When they were part of the program. Um, also if a new college comes into the program, they would be, um, obligated to honor the certificates, um, that have been purchased in, in, in the past, uh, since the, since the inception of the program. So, um, I know that somebody had that question as well. So that’s what would happen in that event.

So I wanna get to the U Fund, um, investment plan. So how the U Fund works, this is a 5 29 plan and a 5 29 plan, um, works in a fundamentally different way than the prepaid tuition program. The way [00:12:00] the U Fund works is you would open up a U Fund account, put your money into the U Fund account, um, the. Your, your investment would be managed by Fidelity.

It would be invested in the market, and Fidelity Investments handles the investment for us and they service the accounts. So when you call up to get information about your U Fund, you would be calling Fidelity. Um, when you call up, um, to get information on your you plan, you would be talking to US Bank who services those accounts.

Um. Now the point of the U fund is for those investments to grow with the market, uh, and they grow without taxes. And so when you take the funds out, as long as you use them for a qualified educational expense. You pay no taxes on the earnings. So qualified educational expenses are things like tuition [00:13:00] fees, room and board, book supplies and equipment.

Uh, so there’s a broad variety there. And the savings can be used at any accredited college or university in the country. So, um, you know, that’s a difference really between the U Fund and the U plan as well. Um, and, and again, as far as the eligible expenses are concerned, you know, you can, you can. Use your U fund expenses for tuition fees, room and board, book supplies, equipment for the U plan.

Um, the U plan locks in a percentage of tuition and mandatory fees, so it doesn’t lock in room and board costs. It doesn’t lock in board. Uh, I’m sorry. Um. Book costs or equipment costs, um, just tuition and mandatory fees and tuition and mandatory fees. Tuition is easy enough to understand. Mandatory fees is a little bit trickier.

Mandatory fees, I mean, you know, why would you voluntarily pay a fee? But, um, essentially it’s fees that every [00:14:00] student has to pay at that college regardless of whether or not they live on campus. Um, what their year is. So things like freshman orientation fees and, and things like that, those are not covered by the e plan lab fees.

Um, so it, it’s, it’s, we get a tuition figure from the college and a mandatory fee figure from the college, and that is what we base our calculations on, and they don’t actually break out. What is involved in the mandatory fees? Mostly at, particularly at private colleges, it’s very tuition heavy. Sometimes at some of the public universities, tuition is very low or comparatively low, and the mandatory fee number, um, is higher.

So it really, um, it really depends on the college. Um, so, but, but the U Plan locks in tuition and mandatory fees. And the U Fund can be used for, for other things. Um, [00:15:00] you know, there are some, um, maximums associated with the U fund. There’s a $500,000, uh, combined account maximum. If you have over that amount, you can’t put any more into your U Fund.

Good problem to have. Not many people tend to have that problem. Uh, and there’s no minimum investment as opposed to the you plan where there’s a minimum investment to buy a U Plan certificate of $300 and there’s no maximum to the U plan. Um, if you. And you have to choose an investment option, of course, and you’re invested in the market with fidelity, whereas the U plan, you’re not, it’s, it’s invested in general obligation bonds.

Um, with the U fund, you know, there’s these questions, same questions might have slightly different answers with the, with the U plan. Um, what happens if your child doesn’t go to college? Um, whereas if the u plan, if you, if your child doesn’t go to college, some of the [00:16:00] same options exist. You can transfer the funds over to another beneficiary.

You can hold onto the account. Um, with the U Fund, you can hold onto the account sort of indefinitely. There’s no set period of time like there is with the U plan. After six years, or you have to cash the funds out or send ’em to a college, you have to do something with them, use them somehow. Um, with the, with the youth fund, you know, you have a much, much longer timeframe that you can, you can hold onto these accounts for.

Um, but if you have to take funds out for the youth fund and use them for expenses that are not qualified expenses, there, there’s a penalty associated with that. So there’s a 10% penalty on the earnings. Uh, the earnings are also taxed at the owner’s rate of income if you have to cash out your U Plan funds at maturity, uh, and, and use them for expenses not related to, to college.

Um, cashing out U Plan funds don’t trigger [00:17:00] any tax consequences as far as the Commonwealth of Massachusetts or the, the federal government is concerned. Um, you fund accounts, 5 29 accounts can be used for graduate school and you plan accounts can’t, in the sense that it doesn’t lock in a percentage of tuition and fees at, you know, for graduate programs.

Once again, you can cash funds out. And get what you put in plus the interest and use those for graduate school. You can use that for room and board. You can use, uh, or they call it food and housing now. Uh, so, um, even though things, if you’re using new plan money for things other than tuition and fees, you know, you still get what you put in plus the interest and you can still use it for those things.

It’s just that the U plan n only locks in, uh, tuition and fees at participating colleges in Massachusetts.[00:18:00]

So those are some of the big differences between the U Plan and the U Fund. I think they’re both really great programs. Um, you know, the U plan, especially if a child ends up going to one of those participating colleges, the idea of course is to keep pace with the increase I tuition. Uh, and over 20 plus years that I’ve been working with the U Plan, we’ve seen tuition go up.

Quite a bit, um, at, at participating colleges, uh, and universities. So if you have a child, especially if you’ve opened that account early enough and they end up going to one of those colleges, you can see really, really good return on that investment. Um, and you can do both. You can do the U Fund and the U plan and use the, you plan to lock in your, um, tuition and use the you fund for.

Food and housing expenses, or living expenses or, or, or books and supplies. Um, so somebody [00:19:00] has the question of, um, how does the U Plan impact fafsa? I’m gonna stop sharing here for just a moment. Um. How does the U plan imp impact fafsa? Does the u plan count towards the family contribution? Uh, the u the U plan does count towards the expected family contribution.

If the parent is the owner of the U plan, uh, that is the U plan would be considered a parent asset. So let me back up here before I go into that and give you sort of brief, anybody who’s not, um. Aware of these sort of financial aid terms. I’ll sort of go back and try to give you a high level of all this.

When you’re filing out your financial aid, uh, forms like the fafsa, which is the free application for federal student aid, you’re gonna send that to every college that you’re applying to. Some colleges also want additional forms, um, but they’re gonna look at things, they’re gonna look at your finances and the main [00:20:00] categories.

Your finances will be sort of be slotted into are student income, student assets, parent income, and parent assets. So for students, their income and assets, um, they’re kind of looked at heavier than the parents, but students tend to not have. Income or assets. Um, and, and if they do have income, they have a little bit of income and it’s probably protected through the FAFSA because the FAFSA protects the first six, uh, almost $7,000 of student, um, income.

So it’s very unlikely that students are gonna have the income to, to affect things or, or assets. So mainly they’re looking at the parents’ financial information. And what they do with this financial information is they put it through a formula and they come up with a number based on your income, what you make and what you have.

Uh, and that number [00:21:00] is called for now, the expected family contribution. That’s gonna change to a different term in a few months, but that’s what it’s called. It’s the, uh, calculated amount that the formula. Sort of feels that the family has the ability to pay for a year. So, um, they arrive at that number through your income and your assets, but within that income is taken at a much heavier percentage than your assets.

So, um, and a U plan is considered if the parent owns it, it is an asset of the parent. And so. At the time when you’re filing your fafsa, you should put what you have in your U plan accounts. That is the amount that you put in, plus the interest, not the value of the percentage of tuition. ’cause we want not gonna know that yet.

Uh, but just what you put in plus the interest, and they’re gonna take that as [00:22:00] part of your overall assets. So. It will impact your financial aid eligibility the same as any other assets would. And the good news is that is not very much. Um, they’re gonna take a look at everything that the parents have for assets, for available assets, and only take about three to 5.6% of that amount as what you can afford to pay for college.

So they’re gonna take a really, so let’s say you have $10,000 in your U Plan account. They’re gonna expect you within the formula to use $560 of that to pay for college. So that’s how much that would increase your expected contribution. Whereas income, they’ll take anywhere from zero to 47% of your adjusted gross income for the year as to what you can pay for college.

Um. So that is if [00:23:00] the parent is the owner, so it, it, it affects it just like any other asset, which is not terribly, um, much. Um, and then of course if the, if the owner is somebody other than the parent, it, it wouldn’t be really looked at at all in terms of financial aid. Um. Back to the question of a student deciding to go to a non-participating college and the money is returned using CPI interest.

If the money is used to attend the alternative college, does this decision allow to avoid the taxable event? So I wanna be clear about this. If you cash out and get what you put in plus the interest, um, for the E plan. You that that is not a, that does not trigger any tax paperwork. Um, there’s in terms, and I will say, as I always want us to say, and they should, we are not tax professionals.

You should consult your tax preparer for any tax questions, but [00:24:00] cashing the funds out or sending them to a college doesn’t carry tax. Consequences. So that’s for the state of Massachusetts and the federal government. If you live in a state other than Massachusetts Tech, you know, check with your, your state may have different laws and you should check with your preparer.

Um, but just simply cashing out funds from your u plan upon maturity should not trigger, does not trigger tax paperwork. There are two tax forms that are associated with the U Plan. One is a 10 99 DIV, and what that is is, remember I said that, you know, you can hold onto these accounts, past maturity, up to six years, past maturity.

Um, it’s fine to do that. Um, at that point when the accounts reach maturity. They still continue to accrue interest at a money market rate. So it’s not CPI anymore. Um, and you start to [00:25:00] earn post maturity interest. So, um, any post maturity interest over $10 that accrues within a year is needs to be disclosed to you in a 10 99 DIV.

So that is a tax form that is associated with the U plan, but it’s got nothing to do with actually using the funds. And whether or not it actually affects your taxes is gonna be dependent upon your own particular situation. You should, you should consult your, prepare with that. Um, the other one is a new one this year.

It’s a 10 99 OID originalist issue discount. And that is to measure increase in value, uh, in investments. That has been sent out. Again, consult your preparer about that. Although it should be noted that within the OID itself, the increase in value is listed as tax exempt. OID. [00:26:00] If you withdraw from or cash out funds from the U plan, do you pay any tax penalty?

So I, I addressed that sort of, but I do want to talk about this aspect. Everything I’ve been talking about with taking money out of the U plan, and you may have noticed I’ve always had at maturity. So let me go back a little bit. If you don’t have a U plan yet, um, this, this will be helpful to you when you put money into the U plan.

Uh, as I said before, you don’t pick the college, which you do pick. The only things that you have to designate when you’re starting e plan, who’s gonna be the owner of the account. So who’s gonna be the, the adult in charge of the account, who the student is, how much you’re putting in, how often you’re putting it in.

And the big decision you have to make really is what year or years do you want this money to mature in? So you should pick one or more years that [00:27:00] the child. Will be enrolled in college or that you, you anticipate that the child will be enrolled in college. So your money is invested in a bond and your maturity year is when that bond becomes liquid.

When it becomes cash. Um, so you should not assume that you should be able to get money out of the U plan until that maturity year. Approaches and your accounts mature August 1st of a maturity year. So if you have picked 2035 for a maturity year, that’s gonna be for the school year, starting in August of 2035.

And your, your bond would mature August 1st. And so that’s when you’d be able to use that money. Um, if you need the money earlier than that, you can. Submit a request to have an early withdrawal done. Um, and we can see if we are able to do that. [00:28:00] We do give sort of first preference to, um, hardships. Um, but it’s not guaranteed that you’ll be able to get your funds out.

We’ll do the best that we can. Basically, you shouldn’t, um, assume that you’ll be able to get, get your funds out before they mature. But if you do. Get those funds early before mature maturity. There’s no penalty associated with that. You still get what you put in, plus the interest that is accrued up to that point.

Uh, you just wouldn’t get, you know, you’d be missing out on the interest that accrues after it, but, um, but you would get what you put in plus the interest still. Um, so somebody has a question about the youth fund. I believe they said if the $500,000 maximum for contributions are the full balance. Would it continue to earn past 500,000?

Again, I wanna be clear that $500,000 maximum is not the plan. It’s for the fund. Um, and it would still continue to earn, you just wouldn’t be able to [00:29:00] put funds into that. Um, somebody wants to know if you can use a 5 29 for a car if you’re commuting to college. No, you can’t. Um, that is a, that is, uh, transportation costs are not included within.

The eligible expenses list.

Um, lemme see here. Somebody wants to know they just got married. They want, they have to. Somebody with two kids in college. Will their income be included in the financial aid formula? Um, yes, it would actually, your income and assets would be included in the 5 29 formula. Your 5 29 plan, they would expect you to list that.

I would follow up with the colleges directly and let them know, um, that this is the situation and that, you know, you have a preexisting 5 29 plan already [00:30:00] used for another child. And, and hopefully they’ll be able to make some, uh, adjustments for that. But, um, but that’s, that’s what they will expect you to list.

Somebody has a great question here. If we contributed to the wrong year, senior year of high school, how do we contr apply the contributions to a subsequent year and do you still receive a tuition discount? So this is probably the most common, um, error that that occurs from people. It’s really hard to figure out, especially if your child’s not started school yet, what year they’re going to be beginning.

College, um, you know, town by town, things change as far as birthdays and when kids could start school. Um, so if you find as you approach that you have purchased a year that is incorrect. Uh, let’s say it’s, in this case it’s a year early. There’s a couple of things you can do. Again, you can transfer certificates over to other children.

So if [00:31:00] the ages work out that way, you can do that. If, um. If it’s early, like it is in this case, um, you can hold onto these certificates or as I said, for up to six years after maturity. So let’s say you, you’re as in this case, the first certificate matured in the senior year of high school. We can just wait on that and use it in the following year and what you get if they.

If they cash out again, you would get what you put in, plus the interest, plus the post maturity interest that would’ve accrued if they’re attending a participating college. And you can use the funds that way, which to be clear, sending the funds to a college is almost always worth more than cashing out.

Um, almost you would get the percentage, you would get the value of the percentage of tuition of the maturity year. So if you were [00:32:00] to use the funds that matured in the year prior, let’s say, you know, you put in a thousand dollars that’s worth 10% of tuition. College is now. 20,000, you get your two per $2,000 and you hold onto it for a year.

Well, the following year it’s still going to be worth the $2,000 at the college. The value of it freezes at maturity if used to the, for at the college, it’s worth a percentage of the maturity years tuition, so it doesn’t continue to keep pace at the college after maturity. So we, you would get all the value that you accrued up to that point, minus that one year increase, assuming that there is an increase that year.

Um, and don’t forget, you’d also be getting post maturity interest separately cashed out to you as we need to do that by law. Um, and then also the, you know, if, if, if neither of those things are true and, and it’s it’s way off and, and there’s no other options, you can. [00:33:00] Request a maturity year change. Um, and so, you know, that’s a form you can log onto your account online and request a maturity year change, uh, print off the paperwork, send it into us.

Um, we have limited capability to change maturity years ’cause you put money in it. It purchased the bond with the maturity year. So we can’t change the actual maturity year after purchase. What we would need to do is see if MEFA MEFA owns a supply of bonds, and if we had one that we could swap that matched your purchase year and the year that you want to contribute.

You know, the year that you wanna change this one to, um. We’ll swap that. Uh, but we may not, and we are, our bond supply fluctuates monthly and, um, you know, if we’re not able to accommodate that request, we’ll hold it on file. We’ll continue to check back. [00:34:00] I always tell people it’s not guaranteed that we’ll be able to do it.

You can request it. And if we are able to do it, there’s really no way to know how long it’s gonna take us to do that. So, you know, we’ll try the best we can. We may or may not be able to change the maturity year. Um, what is the minimum holding term for a u Plan certificate or earliest maturity year? Yeah, that is a really good question.

Okay. So remember when I said when you’re putting funds in, you have to pick a year or years that you want, you know, the, the certificate to mature in. If you were to go and do this now. What you would see is your first year available would be 2028. There’s a five year minimum between when you put money in and when it can mature in a certificate.

So that not only applies to opening up a U plan account, but contributing as well. So if you have, um, you know, uh, [00:35:00] if you are a child who’s gonna start college, you think in 2035. You can contribute to that this year. You can contribute to it next year. You can contribute to it all the way through, up to 20 up, up until 2030.

And at the next maturity, I’m sorry, the next purchase year, 2031, you would see that your first year that you can choose from is actually 2036. So, um. You can contribute to these accounts up until about the child’s junior year or so in high school. Um, you know, no one’s gonna stop you from putting the funds in.

It’s just that, um, you know, after a certain point you’re gonna start to the, the, the students college. Dates will start to fall within that five year window and you won’t be able to lock in tuition for, you know, one year next, or two year next or three years on. So when [00:36:00] setting up a U plan, can you set up one for each dependent?

Yeah. So you can do that. So when you go on to the website. Now, why don’t gonna show you the website here actually, because I wanna show you. How you can go on and, and create,

create an account here.

So you can go to MEFA, you can go to Start to Save, go down to you Plan prepaid tuition program, and it’s right there. Just put in your name.[00:37:00]

Actually, hopefully you can hear this. I know the audio is a bit dodgy from time to time, but this is how I can actually

go ahead and get started here.

So, yeah. Create a username and password, and there I am.[00:38:00] [00:39:00]

Okay, so that was that, and hopefully you could hear that. Um, but that, that’s how I just kind of wanted to show you how easy it is to save in, in the U plan. And to open up an account. Now lemme get back to some of the questions here. How much interest do people usually get on the CPI? So it really varies.

It gets assessed every August. Uh, it gets added to the account every August 1st. And, um, now of course as inflation is really high, it, it’s, it’s [00:40:00] much higher than it typically has been. So in years past, you know, my, my answer to what, what’s the CPI is usually it’s somewhere between one and 3%. Um, and, you know, it was 9% last year, so, um, it, it’s been quite high.

Um, and just to a ask a answer, a question that was asked by one of the registrants, what happens if, you know the cost of cost goes down or if it, if it doesn’t go up fa high enough past the CPI? If the, which it does happen, it has happened at, at certain colleges, at certain points. Um, if. Funds are worth more cashed out to you than sent to a college.

The system will automatically cash them out to you. We can’t do anything else than that. Uh, would, would not allow us to process a, a distribution to the college when it was worth more as a cash out. Um,

so [00:41:00] if I have a daughter finishing up eighth grade, it’ll be too late to open up, uh, a savings account for, uh, uh, a u Plan account for her freshman year of college. It depends if she’s, if she’s entering in and I’m not great with numbers, so I’m, I apologize. It may be, I mean, she, if she’s attending, um, in August or in the fall of 2027, then it would be too late to purchase for that year.

Um, you can still purchase for later years. Yeah. And something wants to know also if, if, uh, they can change their target date as the child approaches college. Yes. Once you set up your maturity years, you don’t have to stick with those maturity years every year. If you wanna put more in another year, if you wanted to, you know, if you realize you made a mistake and you wanted to put money in later, you can, you can do that too.

You’re not stuck in that same percentage, in those same years every year. Lemme see if I missed. [00:42:00] Um, okay. Okay. What does it mean that is FDIC insured. Okay. That is also with the U Fund, not the U plan. The U plan are in bonds that are backed by the full faith and credit of the Commonwealth of Massachusetts For the U Fund, you’re invested, right?

And so it’s invested in the market. There’s some risk there. Um, but they, they do offer an FDIC insured option where you can have up to $250,000 insured by, of your principle insured by the federal government so that the market does go down. Your principle is safeguarded. Uh, the flip side to that is when the market is doing well, it might not, uh, accrue as much interest as other or as much value as other investments.

If you do have investment questions related to the U Fund, you should speak with Fidelity Investments. Who, who handles that? [00:43:00] Um, let me see here.

Wrong year, setting up the U plan. Can you set one for each? Yes, you can do that. Um. You should, you should say that you paid 10% penalty if you use ineligible purchases, but you can cash out with no penalty. No. So, um, I’m sorry. So if, if you tho those are two programs, again, there are 10% penalty is associated with the you fund, not the you plan.

The, you plan, you can cash out with no penalty, um, the youth and use it for whatever you, you know, whatever you, you like essentially for the youth fund. If you use the funds for anything other than tuition fees, food and housing, book supplies and equipment at participating colleges or, um, you know, any sort of other institutions, uh, there is a penalty [00:44:00] associated, a 10% penalty on the earnings and then the earnings are also taxed at your rate of income.

Um, now I, I actually, I’ll, I’ll mention this as well. For the, you fund the 5 29 plan. There’s been some expansion of eligible expenses that includes 10, uh, $10,000 annually on K through 12 tuition, $10,000, um, for apprenticeship costs, and, uh, one time $10,000 payment on student loans. Um, also for the U fund.

I said you can use these at any, the fund you can use at any accredited college or uh, university in the country, even some international colleges that they’re set up to take US federal funds for the, um, and also it doesn’t have to be for college specifically. It can be career training, vocational program training, as long as the institution itself is set up to take US federal funding.[00:45:00]

But the you plan again is locking I tuition and fees. At this network of Massachusetts colleges, anything other than that, you can always cash out, get what you put in, plus the interest and you can use without penalty however you like. But the U plan only locks in tuition and fees at for undergraduate education at these particular, uh, 70 or so Massachusetts colleges or universities.

Would it make sense to create a U plan in addition to already having set up a u fund account as well? Certainly, yes. If you’re able to do that, it, it, you know, there there’s the, the programs each have their particular strengths, right? So the good thing about the U plan is, um, if your child ends up going to one of those colleges, as I said, uh, a participating college in the program, tuition has been going up.

Um, O over the [00:46:00] years. At a, at, at, at a rate that has greatly outpaced inflation. Uh, this year is, and, and, and, you know, the, the past year or so and this, uh, have been high infl, you know, historically sort of high inflation. So I don’t know if that’s the case. And each college will, will have their own increases year by year.

Some go up a lot, some go up a little, some, you know, have years where they are very similar and. Might take a leap one year, but on average, um, you know, over years and years, uh, it’s been a good bet that your. You plan certificate, uh, is gonna be worth more at a participating college than it would be cashed out and getting what you put in plus C interest.

Um, even still if it, if they end up not using it in that way, you still get what you put in plus the interest, um, and, and which you can cash out without penalty, um, [00:47:00] federally or from the Commonwealth of Massachusetts. Having the U Fund or 5 29 plan you can use for all these sort of expenses at, at, it has a lot of variety in terms of the colleges and, and types of institutions you can use it at, um, with, with no taxes and the expenses.

So it’s not just tuition and fees, but it’s, it’s food and housing, it’s book supplies and equipment so they can compliment each other very well. So it certainly would if you’re able to do that. Can you use any excess, uh, you plan for graduate school? No, you can’t use the you plan for graduate school unless you’re gonna use it in that way where you cash out and, and get what you put in plus the interest back.

Um, so it doesn’t lock in tuition and fees. At, uh, graduate programs. Again, you can transfer the beneficiary over to another child. So if you have leftover funds from an older sibling, you can transfer that over to a younger sibling. Now when you transfer certificates. [00:48:00] Or even accounts, nothing about the certificates actually changed except for the beneficiary.

So it still has the same purchase here, it still has the same maturity year. It is always going to be worth at the college what it was worth in its maturity year. Um. But it still, you know, retains the value up to that point. So it’s still probably gonna be a good I idea to transfer that over to beneficiary, even if you, you miss a few years of increased tuition there.

So if you have a child who, uh, had a 2031 maturity year and it was worth, um. A good amount of money at a college and, and you transfer that over to a younger child who’s not gonna use it until 2029, it’s gonna be worth what it was worth. I’m sorry. Other way, he’s not gonna use it until 2033. Um, so two years later it’s still gonna be worth what it was worth in 2031.

So it, it’s not gonna gain in value at the school, but it’s still [00:49:00] gonna retain that value of 2031. So it’s still probably gonna be a good idea to do that. Um, and then again, there’s interest accruing after maturity that you’re gonna get as well.

Um, we’re rolling up to an hour now. Um, I, I, I, I really love all these questions. Um, we got about 10 minutes. Um, hopefully I’ve answered your question. Let me actually just tell you how it works when, um, you’re ready to use the funds. I think I’ve gone over setting up the accounts and, and having, um, how the value accrues.

When you have accounts that are maturing, so let’s say again you have a a 20, 30 maturity year and you’re gonna use, ’cause your son is or daughter is gonna go to college. I’m sorry, I keep saying son ’cause I have a son. But, um, when your son or daughter is going to college in, in 2030, let’s say they’re going in August of [00:50:00] 2030, um, your account matures August 1st, so a few months prior to that, around March or so, we’re gonna notify you that you have.

Accounts that are maturing, and you can either go on to the website, access your account online, or you could call us up and tell us, um, you know, let, let, let’s, uh, I, I wanna send these funds to a college and we would let the college know in a pre disbursement roster around July that the student has u plan funds and, and the amount that is estimated to, to go.

Um, and then you would tell us the college, and we would send the funds to them in the first August and Friday. Uh, first Friday in August. If you’re cashing out again, um, we wouldn’t get in touch with the college. You just let us know that you want to cash out and we would send those funds to you, uh, after the 1st of August as well.

Any other questions [00:51:00] coming through?

Yeah, I can send a, a copy of the PowerPoint slides. Let me see if there’s any questions that were, um, asked ahead of time that I, that I didn’t, uh, address.

Um, somebody wants to know if, um, you can use the e plan for trade school. Again, it doesn’t lock in a percentage of tuition. In fees at trade schools, but you can cash out, get what you put in, plus the interest if that’s what the student decides to do.

Um, do you o only open an account online or at a US bank? Oh, it’s, uh, it’s basically you wouldn’t go to a US bank. It would, it’s a, uh, [00:52:00] online process or. You can download a paper form from the website and, and fill it out and send it in. Um, you could. Those are the two ways to open an account.

Take a look here, see if there’s anything else. Oh, one thing I did wanna mention as well, uh, and that is there are. Tax deductions that you can claim, uh, for your contributions into the U plan or the U fund actually on your Massachusetts State income taxes. So if you’re a married filer filing jointly, you can deduct up to $2,000 of your contributions.

Um, uh, on the u plan of the U fund, if you’re an individual filer, that’s $1,000 and that is a limit that that is per filer, not for, not per account. So if you [00:53:00] have a, a few accounts for a few kids. You know, you, you’re, you’re maxed out at whatever your status is, 1000 or $2,000 for your contributions. But, um, but still just a, an incentive for people to, to save that I think is appreciated.

Many states had have that type of, uh, program and so we’re glad to be able to offer that, offer that as well. Yeah, I’ll send you a copy of the slides and there’s a few slides. Actually, I didn’t go over. I, I just wanted to answer the questions that you had and, and I used the slides kind of to enumerate some of the answers to those questions.

Um. I just will point out again that the, um, enrollment deadline for the e plan this year is July 15th, and that’s so you have until then to, to get your contributions in to be able to purchase e plan certificates for the, um, 2024 tuition year. Um, I should also mention that [00:54:00] after that. Happens, you still have accounts, right?

Um, that you’re contributing to. Uh, you can continue to contribute to the same year as long as those years are available. Um, so, you know, as long as it doesn’t fall into that, within five year win, uh, of, uh, use window. Um, and so your contributions next year then will. Purchase a percentage of next year’s tuition.

So if you, let’s say pick 2030 as your maturity year, again, we’ll use that as an example. And again, as an example, you put in a thousand dollars that buys 10% at, uh, at college. That costs $10,000 this year. Um, if you put in a thousand next year. Let’s assume tuition’s gone up a little bit at that college.

Next year, it’s probably gonna buy a little bit less than 10%, right? It’ll probably be somewhere around 9.5% if that’s the case. Um, you know, that just gets added to [00:55:00] your, your total. So let’s say again it’s make the map easy for me. Let’s say it’s all for the freshman year, and so you bought 10% of your child’s freshman year this year, next year.

If you buy 9.5% with the same amount that’s gonna be added to your 10%. So you have 19.5% of your child’s freshman year, um, paid for. So that’s how that works. Um, but again, you can put in more than one year at a time. So, uh, you can, you can put in up to four years or more and, and sort of, uh, as you saw in the video, just sort of make sure your, your total total’s up to 100%.

So. Of your investment there spread out among the years. So I, I think that’s probably all of the, the, um, questions that are gonna come in. I do thank you for your questions and I thank you for your time. And if you have any further questions, let me just put this up here.[00:56:00]

I’m gonna put R. First of all, our social media info here, and then our contact info. You’ll also be getting, um, a recording of this presentation and, and I, I can, uh, include the slides. Um, if you have any further questions, please don’t hesitate to reach out to us and good luck with saving.