Revision 16-4; Effective December 1, 2016

 

 

F-8100 Educational Assistance

Revision 13-3; Effective September 1, 2013

 

Educational assistance may be provided in many forms including:

  • Grants, scholarships, fellowships, and gifts
  • Assistance under Title IV of the Higher Education Act of 1965 (HEA) or the Bureau of Indian Affairs (BIA)
  • Department of Veterans Affairs (VA) Educational Benefits
  • Educational payments under AmeriCorps and the National Civilian Community Corps

 

F-8110 Grants, Scholarships and Fellowships

Revision 13-3; Effective September 1,2013

 

  • Any portion of a grant, scholarship, fellowship or gift used for paying educational expenses is excluded from income.
  • Any portion of a grant, scholarship, fellowship or gift that is not used to pay current educational expenses, but will be used for paying this type of educational expense at a future date, is excluded from income in the month of receipt.
  • Any portion not used for current educational expenses or set aside for future educational expenses is countable income in the month received and a countable resource the month after, if retained.

 

F-8120 Title IV of the Higher Education Act of 1965 or Bureau of Indian Affairs

Revision 13-3; Effective September 1, 2013

 

All financial assistance received under HEA or BIA is excluded from income and resources regardless of use. Interest and dividends earned on any unspent educational assistance under Title IV of HEA or under BIA also are excluded from income.
Examples of HEA Title IV Programs:

  • Pell grants
  • Academic Achievement Incentive Scholarships
  • Federal Supplemental Educational Opportunities Grants (FSEOG)
  • Federal Educational Loans (Federal PLUS Loans, Perkins Loans, Stafford Loans, Ford Loans, etc.)
  • Upward Bound
  • LEAP (Leveraging Educational Assistance Partnership)
  • SLEAP (Special Leveraging Educational Assistance Partnership)
  • Work-study programs

NOTE: State educational assistance programs, including work-study, funded by LEAP or SLEAP are programs under Title IV of HEA.

 

F-8130 Department of Veterans Affairs Educational Benefits

Revision 13-3; Effective September 1, 2013

 

Payments made by VA to pay for tuition, books, fees, tutorial services or any other necessary educational expenses are excluded from income.

 

F-8140 AmeriCorps and the National Civilian Community Corps

Revision 13-3; Effective September 1, 2013

 

Effective with benefits payable on or after Sept. 1, 2008, cash or in-kind payments provided by AmeriCorps State and National or AmeriCorps NCCC are excluded from income, even if they meet the definition of wages.

Such payments include, but are not limited to:

  • Living allowance payments
  • Stipends
  • Food and shelter
  • Clothing allowance
  • Educational awards
  • Payments in lieu of educational awards.

 

F-8200 Tuition Savings Programs (Qualified Tuition Programs)

Revision 13-3; Effective September 1, 2013

 

Tuition savings programs allow individuals to prepay or contribute to an account established for paying a designated beneficiary’s education expenses beyond high school. Prepaid tuition plans and higher education savings plans authorized under Chapter 54, Subchapter G, H, or I of the Texas Education Code will be collectively called tuition savings programs.
Tuition savings programs include:

  • Prepaid tuition plans such as the Texas Tuition Promise Fund or the Texas Tomorrow Fund II.
  • Higher education savings plans such as the Texas College Savings Plan.
  • 529 Plans or Qualified Tuition Plans authorized under Section 529 of the Internal Revenue Code.

Note: The Texas Guaranteed Tuition Plan (formerly the Texas Tomorrow Fund) is closed to new enrollment but contracts will continue to be honored by the state.

 

F-8210 Resource Treatment

Revision 13-3; Effective September 1, 2013

 

Whether the applicant/recipient is the account holder, contributor, or beneficiary, exclude any funds used to establish a tuition savings program from countable resources if the tuition savings program was established:

  1. before the beneficiary's 21st birthday; and
  2. by the beneficiary's parent, stepparent, spouse, grandparent, brother, sister, uncle, or aunt, whether related by whole blood, half blood, or adoption.

Note: The designated beneficiary can be changed to another member of the contributor’s family as long as the new beneficiary meets the above criteria at the time of the change.

Funds used to establish a tuition savings program are not considered a transfer of resources.

 

F-8220 Income Treatment

Revision 16-4; Effective December 1, 2016

 

Payments made from or interest earned on a tuition savings program are excluded from countable income. 

This exclusion does not apply to groups whose eligibility is determined using the Special Income Limit. The Special Income Limit groups are as follows:

  • institutional programs:
    • state group home (TA 12 ME);
    • state school (TP 10 ME);
    • non-state group home (TP 15 ME);
    • state supported living center (TA 16 ME); and
    • nursing facility (TP 17 ME);
  • waiver programs (TA 10 ME);
  • Community Attendant Services (CAS) (TP 14 ME); and
  • Program of All-Inclusive Care for the Elderly (PACE) (TA 10 ME).

This exclusion does not apply if a withdrawal from the tuition savings program is made for any purpose other than paying the qualified educational expenses of the beneficiary or if the tuition savings program is cancelled. Distributions from the account not used for the educational expenses of the beneficiary are considered income to the individual receiving the funds in the month received. If the individual is the account owner, distributions from the account to the beneficiary which are not used to pay educational expenses should be explored as a possible transfer of resources. 

Note: A prepaid tuition contract terminates on the 10th anniversary of the date the beneficiary is projected to graduate from high school.

 

F-8300 Uniform Transfers to Minors

Revision 13-3; Effective September 1, 2013

 

Under the Uniform Transfers to Minors Act (UTMA), a person may establish a qualifying UTMA account in the name of a minor child. To set up the account, the person irrevocably gifts cash or other resources, such as stocks and bonds, to the account. The person names a custodian to the account, who frequently is the person who set up the account. The person does not incur a transfer of asset penalty by setting up a UTMA account.

The custodian on the account has a fiduciary duty to manage the account on behalf of the minor child. The custodian of the UTMA account may use UTMA account funds to purchase an education fund somewhat similar to the Texas Tomorrow Fund for a minor child who is qualified under state law.

The minor child must be under age 21 at the time the education fund is purchased. The qualified minor child would have to remain the named beneficiary of the education fund and the education fund must remain part of the holdings of the UTMA account.

State laws regulating the UTMA account establish appropriate expenditures of the education fund on behalf of the beneficiary, the minor child. The beneficiary takes control of the education fund from the custodian once the beneficiary obtains majority.

Consult with your regional attorney regarding state law governing UTMA accounts.

 

F-8400 Coverdell Educational Savings Accounts (ESAs)

Revision 13-3; Effective September 1, 2013

 

Coverdell Educational Savings Accounts (ESAs) are trusts or custodial accounts created by a donor for the benefit of a child under age 18 or someone with special needs. The funds put into the ESA are for educational use only. The ESAs are authorized and governed by Section 530 of the Internal Revenue Code. They are similar to college savings plans, commonly called 529 plans, authorized and governed by Section 529 of the Internal Revenue Code. ESAs differ from 529 plans in several ways, but the most important difference is that, unlike a 529 plan, once the person gives the money to set up the ESA, the donor may not withdraw the funds for personal use. The funds may only be used for the beneficiary, a student, and then only for expenses that meet the ESA guidelines. Consult with your regional attorney regarding an ESA.