Benacquisto and Florida Prepaid

Colleges and Universities A-Z University of Florida
1

I’ve got another question about the Benacquisto.
We have Florida Prepaid. It looks like my son has a good shot at getting a Benacquisto.

How does the Benacquisto affect Prepaid?

–Is it like Bright Futures, where Florida Prepaid is used first, then the scholarship is used to pay everything else and the student gets whatever cash is left over to use as they please?
–Or does Benacquisto come first? And if so, what kind of refund would we get on the Prepaid? Would we get back just the money we put into it, or would the refund be equivalent to today’s value of the tuition?

Thank you.

2

I think you’d be getting back today’s value in tuition. (or room & board, or whatever you contracted for) Otherwise they’d actually be penalizing you. You can set that money aside for graduate school or whatever you deem best.

3

Thanks Trisherella. It’s fair that they’d give you back today’s value, but I honestly don’t trust the State to be fair.

I also wonder if they difference between today’s value and the value that was paid would be taxable.

I would think, logically, that it would not be taxable, since the purchase was for an actual product (tuition in the year the child would be enrolled) and not an investment, per se. But who knows.

4

The Florida Prepaid is just a 529-like account. You never have to withdraw funds from it if you don’t want to and you can save that money for grad school. I think there is a way to transfer funds like you can a 529 to another student, but then it is really going to be a 529 and you won’t be guaranteed the funds to pay full tuition for the transferee (since they are a different birth year than the original child the fund was purchased for with a guarantee).

Taxable, not taxable is an IRS issue not a BF issue (but I think you can withdraw 529 money without penalty if your child gets scholarship funds to pay for college expenses and up to that amount per year.

I was surprised to learn that the schools control how BF can be used and if it is refundable. At my daughter’s school (private) it is not refundable to her and can only be used for tuition because that’s the rule her school set. Other schools (and most of the big publics) allow BF to be used for pretty much anything (tuition, study abroad, off campus housing) and is given to the student after billed costs are paid. At her school Florida prepaid would be applied LAST because it is really just a 529 account. The AMOUNT of the FPP is set by tuition, but it doesn’t have to be used for tuition.

5

I am not specifically knowledgeable about Benacquisto, but below is what UF’s websites says about BF, Prepaid and other scholarships (which, I would assume, Benacquisto would be considered). As others have said, each University may handle these matters differently.

BTW, maybe one benefits of applying Prepaid first is that some of the older Prepaid contracts exempt you from having to pay some of the fees. In my case, my Tuition Only contract exempts me from the Tuition Differential, Capital Improvement and Student Aid Fees. That is about $56 per credit hour.

From UF Website:
Florida Prepaid and Financial Aid

Students participating in the Florida Prepaid College Program who are also expecting to receive financial aid (i.e., Bright Futures, Pell, student loans, other scholarships/grants) will have the Florida Prepaid applied first to tuition and applicable fees. Financial aid received will be disbursed and applied to outstanding charges which may include tuition and fees not covered by the Florida Prepaid Program. Any excess financial aid that remains after debts have been paid will be refunded to the student (student/parent if PLUS Parent loan).

6

Make sure your daughter specifically opts out of using Florida Prepaid on her myUFL account, otherwise it’ll be used first!

7

Seems to definitely be some conflicting views as to what is the best approach. Some say use the FPP first while others say opt out of FPP. There has to be an option that works out best.

8

@moscott We are having the same dilemma. Is your contract pre-2007? It is my understanding that if your FPP contract is pre-2007, you may want to consider applying your FPP since you are exempt from having to pay the tuition differential fee of about $40/credit hour. It would mean about $560 extra per semester in your pocket based on taking14 hours since the Benacquisto pays full cost attendance which includes the tuition diff. fee. Can anyone else confirm this?

9

@g8torlaw Yes the FPP is pre-2007. Beyond that there are other questions as well. If he goes in with about 40-45 credits how does this affect things? What about BF? If the FPP is used first how does the money get funded into who’s account?

10

We are only going through this for the first time, so we haven’t yet actually experienced it. Nevertheless, we had some FPP left over from an older child, which we have transferred to our current freshman, so we are using that FPP now. (We will transfer our freshman’s FPP back to him after using up our older son’s FPP. You can transfer it between family members.).

At Preview, we were advised that FPP gets used first and gets funded first. It goes directly to the school. We were told Benacquisto funds after drop/add, going directly to the school with the excess going into our son’s checking account.

As far as BF, you don’t get it as an additional funding source except for the summer immediately after graduation. You can’t get both BF and Benacquisto at the same time. You can get BF the summer after HS graduation since the Benacquisto doesn’t kick in until the fall after HS graduation. My son is using BF for Summer B. (The Benacquisto statute says that it can be used in the summer provided that the state has allocated money. However, we don’t know whether or not it is or will be available for later summer school. But, if not, presumably we could use BF again.)

The Benacquisto is not reduced if you arrive with AP or dual-enrollment credits. It will fund 100% of the number of credit hours required to graduate in any given program provided that you haven’t fulfilled all graduation requirements. (So, don’t fulfill all the requirements until you are ready to graduate.) There is no maximum number of semesters that it covers, except that you must be registered full time each semester that you are getting Benequisto. Accordingly, if you were in a program that required 120 hours and you took 12 hours per semester, which is the minimum full-time requirement for fall and spring, it would fund 10 semesters.

Another interesting fact that we were told at Preview is how Benacquisto works if you end up short in your last semester by fewer hours than required to be a full-time student. Let’s say that the Benacquisto had paid for 114 credit hours toward your required 120 credit hours for your degree. In that case, the Benacquisto will pay for your room, food, fees, and the charge per hour for the 6 credit hours still available under the Benacquisto provided that you paid for another 6 credit hours to qualify as a full-time student.

Our son did not get a Presidential Scholarship from UF, but, at Preview, we were told that he wouldn’t have been able to keep it anyway since he has the Benacquisto. They said that the UF doesn’t give UF scholarships in addition to the Benacquisto. Has anyone heard differently?

11

Hi @oldandwise - I just saw your question from awhile ago while researching Benacquisto and study abroad. Our freshman daughter received both Presidential and Benacquisto scholarships. We thought one would negate the other but they stack. She will be using it to fund her study abroad this summer.

12

Thanks for the first-hand knowledge! I’ll take it over the word of a young staff member at Preview.

13

Greetings All,

My son will be attending FSU this fall (2019), and is a Benacquisto recipient. We also have a pre-2007 Florida Pre-paid contract with a 4 year tuition plan, 4 year fee plan, and 2 year dorm plan. I’ve spoken with the FSU financial aid office (everyone was extremely pleasant and helpful, BTW), The Florida Dept of Education, and Florida Prepaid. From those conversations and reading through this, and other, threads, I think I have a pretty good handle on what options are available. I’m hoping that someone here might have some first hand experience and be able to render some advice regarding which might be the BEST option.

If I understand correctly, we can either:

  1. Allow FSU to draw from the Florida Prepaid. In this scenario, the Florida Prepaid funds would be drawn against first, then any remaining charges would be paid from the Benacquisto funds, and the remainder refunded to our son (at the end of each semester?)

or,

  1. Place the Florida Prepaid on hold with the plan of using it for grad school, and solely use Benacquisto for FSU costs. This, of course, presumes that our son keeps his head screwed on straight and opts to go that route in the future :).

or,

  1. Ask FSU to not draw from the Florida Prepaid. Benacquisto would pay all qualified costs of attendance, and we could request a scholarship refund from Florida Prepaid, which would be paid to the account holder (in our case, that’s my wife) each semester in the amount that would have been paid to FSU if we had actually used it.

So, with all that… Can anyone with first hand experience, or certain knowledge of these issues, (1) confirm that my understanding of the options are correct; and (2) offer any advice regarding pros/cons? Our goal is to maximize the excess funds, which could then be utilized to give him a leg up after college, whether that be grad school costs, first house down payment, etc. I’m also concerned about any tax implications. Florida Pre-paid has told me that there are no capital gains tax concerns with a scholarship refund, but I’d feel better hearing from someone with first hand experience, as I doubt the IRS will care much about what I was advised over the phone by Florida Pre-paid.

Thanks in advance for any assistance anyone can offer!

14

All that you’ve written sound correct (although the funds may be refunded to you earlier than the end of the semester; the BF funds used to be applied about 6 weeks into the semester).

For taxes, I THINK it would work like this:

Option 1: The FPP would not be taxed as the FPP is considered a 529 and it is allowed to use funds for R&B. The amount your son receives from Benacquisto would be fully taxed as a scholarship not being used for QEE. It appears the only thing paid from Benac. after FPP would be a meal plan, and books; the books aren’t taxable and the meals are. That’s a big tax hit to him at the kiddie tax rates.

Option 2: No tax consequences for the FPP account at this time. It’s just a 529 growing on the sidelines. The Benac. will be taxed like any other scholarship - the QEE amounts not taxed, the R&B and incidentals taxed at kidding tax rates.

Option 3: The Benac taxed as in Option 2. I think you can withdraw the FPP (as you could a 529) with only having your wife pay taxes on the investment increase. I think those taxes would be at your regular rate. There are some posts on CC about withdrawing 529 money if the student gets a scholarship.

If Benacquisto is paying 100%, including fees, then the only tax benefit to Option 1 is that the room is not taxes (room is a qualified expense under a 529). When people are deciding between pre-2007 plans and whether to apply the FPP before BF, it may matter because BF may not pay the fees and the dorm fee isn’t taxed. If Benacquisto IS paying the fees? Then you are taxing all of the Benacquisto under option 1 and option 3 may save you/child some taxes.

Some of the decision may be whether this student is going to grad school or if there are siblings who can benefit from transferring the FPP funds. I don’t think you have to withdraw the FPP during the same tax year as the scholarship is received so you could do option 3 sometime down the road without changing the tax consequences. If he does go to grad school, great. If he has siblings who can benefit, great. If your wife just has to withdraw the FPP in the future, she’ll pay taxes on some of it.

15

Wonder if you have got any new info on this. I have similar situation with my son going to UF. I checked the web for a while and your summary here are the best I can find. Like yours, my main focus is trying to minimize tax implication from using FPP/Benacquisto/other scholarships.

By applying FPP first, I am afraid that all the refund (not just the gain fromFPP) will be taxable since the refund is from Benacquisto and is being used for none QEE expenses.

Many thanks for any help!