KAPT Program Overview
KAPT At A Glance
Detailed Questions and Answers about KAPT
- How KAPT Works
- Eligibility and Use of Benefits
- Kentucky Schools Eligible for KAPT's Guarantee
- Flexibility
- KESPT and Other Education Savings Plans
- Administrative Fees
- Refunds
- Tax Issues
- KAPT Board of Directors
KAPT At A Glance
Options
KAPT purchasers could choose from three different plans:
- The Value Plan guarantees tuition at most of Kentucky's community and technical colleges.
- The Standard Plan guarantees tuition at Kentucky's 4-year public universities.
- The Premium Plan aims to cover the average price of tuition at Kentucky's private colleges and universities.
Detailed Questions and Answers about KAPT
How does KAPT work?
KAPT guarantees the price of tomorrow's tuition at lower prices today. There are three plans.
THE VALUE PLAN–Guarantees the price of in-state tuition and mandatory fees at almost every Kentucky Community and Technical College System (KCTCS) college. Participants prepay the cost of KCTCS tuition through a lump- sum or monthly payment plan. Tomorrow's KCTCS tuition price for full-time enrollment will be guaranteed up to 16 hours per semester. If the child attends a more expensive school that is not in the Value Plan, the family will have to make up the difference.
THE STANDARD PLAN– Guarantees the price of in-state undergraduate tuition and mandatory fees at Kentucky's eight public universities. Participants prepay the cost of tuition at Kentucky's most expensive public university through a lump-sum or monthly payment plan. This plan will guarantee tomorrow's tuition price for full-time enrollment, up to 16 hours per semester, at the state's most expensive public university. If a child attends a less expensive school—for instance, a community college or one of the less expensive four-year regional universities—the difference can be applied to qualified higher education expenses such as room, board, and books. If the child attends a more expensive school not in the Standard Plan, the family will have to make up the difference.
THE PREMIUM PLAN–Aims to cover the average price of tuition at Kentucky's private colleges and universities. Participants prepay the weighted average cost of tuition at Kentucky's private colleges and universities in the Association of Independent Kentucky Colleges and Universities. While no particular school's tuition is guaranteed, your investment grows at the same rate as the University of Kentucky's tuition. This plan should cover tuition at many of the state's private schools and all of Kentucky's public colleges and universities. Depending on tuition rates, any money left over can cover qualified educational expenses such as books, room, and board.
Is KAPT guaranteed by the Commonwealth of Kentucky?
The KAPT Trust Fund was backed by 75% of the State Treasurer's Unclaimed Property Fund until the statute was repealed in 2006. As part of the 2006 state budget process a replacement statute (KRS 164A.708) went into effect and guarantees all KAPT contracts in existence on April 25, 2006 with the full faith and credit of the Commonwealth of Kentucky. According to the statute, the General Assembly shall appropriate the necessary funds to meet the liability of the program in the event the KAPT Trust Fund does not have sufficient funds to pay contract obligations.
Please keep in mind that KAPT's guarantee only becomes effective upon your full payment of all contractual obligations and enrollment by your KAPT beneficiary. Entering into a KAPT contract establishes a legal obligation of the Fund to pay tuition only if you meet those requirements.
Is there an individual account set up for my money?
The program is not an individual savings account. It is a trust fund that combines the contributions of all participants in order to maximize benefits from institutional investment activities. KAPT does maintain separate accounting records for each participant and his or her contributions for the purpose of calculating refunds, reporting to the Internal Revenue Service, and administering payments when a student enters college. Purchasers will receive annual account statements reflecting contributions, distributions, and other financial data relating to their KAPT contract upon request.
Who manages the money I pay into KAPT?
The Fund is governed by the KAPT Board of Directors whose members include state officials and other Kentucky citizens with a range of financial, business, and legal expertise. KAPT investments are professionally managed by an independent investment manager under the oversight of the Board. Funds are managed consistent with prudent investment strategies, which are defined and monitored by a nationally-recognized investment consulting firm.
The Kentucky Higher Education Assistance Authority, the state agency that administers loan, grant, scholarship, work-study, and savings programs for higher education, administers KAPT's daily operations under the governance of the KAPT Board of Directors.
Did I receive an official document outlining the terms and conditions of my KAPT contract?
Yes. When you opened your account you were instructed to read the current Master Agreement and Disclosure Statement documents before submitting an application. After your application was processed, you received a Welcome Kit containing a Terms and Conditions of Payment and Purchase document. Your Terms and Conditions of Payment and Purchase, the Master Agreement, KAPT regulations, applicable state and federal law, and your application make up your KAPT contract.
Eligibility and Use of Benefits
May two people jointly purchase a contract?
Although many people may contribute to a single KAPT account, only one purchaser is allowed. That person is the owner of the contract, but the purchaser can also appoint a successor-in-interest on the application form who can receive contract information and assume contract rights upon the death of the purchaser.
What expenses can be paid with KAPT funds?
Qualified higher education expenses are tuition and fees, books, supplies, and equipment required for enrollment and room and board if the beneficiary is enrolled at least half-time. For more information on the KAPT payment process, see the Using Benefits section.
What "mandatory fees" does KAPT's guarantee cover?
Mandatory fees are those fees required as a condition of enrollment incurred by all students at an eligible educational institution.
Does the purchase of a KAPT contract guarantee student admission to a college or university or in-state tuition rates?
No. Students must meet the admission requirements of the school they wish to attend. The determination by a particular state institution as to whether a student is eligible for in-state tuition rates is completely independent from the ownership of a KAPT contract.
When my beneficiary attends college, how will KAPT make payments?
In general, KAPT will send funds directly to the higher education institution each semester at the direction of the account purchaser. When the projected college entrance year is reached, KAPT will provide information and forms regarding tuition payments. For more information on the KAPT payout process, see the Using Benefits section.
How will KAPT determine the amount of benefits available?
For information on using KAPT benefits, see the Using Benefits section.
How will KAPT affect a student’s eligibility for financial aid?
Any investments or savings are likely to affect financial aid eligibility. In addition, there is uncertainty as to how much and what type of financial aid will be available to families in future years. For federal need-based financial aid, KAPT is treated as a parental asset, like other 529 savings plans. Your contract benefits are not included in determining the amount of Kentucky state student aid your beneficiary will receive, and your contract benefits should not affect the beneficiary's receipt of merit-based financial aid such as academic or athletic scholarships. The best resource for more detailed information is the financial aid office of your local college or university.
Kentucky Schools Eligible for KAPT's Guarantee
The following is a list of Kentucky public colleges, universities, and technical colleges that are eligible for KAPT Value and Standard Plans benefits. Kentucky's Affordable Prepaid Tuition benefits can be used at ANY qualified institution of higher education, public or private, anywhere in the country.
The Value Plan: Kentucky Two-Year Community and Technical Colleges
Ashland Community and Technical College
Big Sandy Community and Technical College
Bluegrass Community and Technical College
Southcentral Kentucky Community and Technical College
Elizabethtown Community and Technical College
Gateway Community and Technical College
Hazard Community and Technical College
Henderson Community College
Hopkinsville Community College
Jefferson Community and Technical College
Madisonville Community College
Maysville Community and Technical College
Owensboro Community and Technical College
Somerset Community College
Southeast Kentucky Community and Technical College
West Kentucky Community and Technical College
The Standard Plan: Kentucky Four-Year Public Universities
Eastern Kentucky University
Kentucky State University
Morehead State University
Murray State University
Northern Kentucky University
University of Kentucky
University of Louisville
Western Kentucky University
REMEMBER: ALL THREE KAPT PLANS CAN BE USED AT ANY QUALIFIED INSTITUTION OF HIGHER EDUCATION, PUBLIC OR PRIVATE, ANYWHERE IN THE COUNTRY.
Flexibility
What if I don’t know which school my beneficiary will want to attend?
That's not a problem. If, for example, you pay for the Standard Plan in anticipation that the student will attend a four-year public university, but the student later decides to attend a Kentucky community college, the difference between the tuition of the four-year university and the tuition at the community college can be used to pay for books and other qualified higher education expenses.
Can more than one account be opened for the same beneficiary?
Yes. For example, if you anticipate your beneficiary may want to attend a community college and a public university, you may want to open a two-year Value Plan and a two-year Standard Plan. Also, other family members and friends can open KAPT accounts for your beneficiary as long as the total years of tuition purchased does not exceed the five-year maximum.
What if a student decides to attend a higher education institution that is not included in the tuition plan purchased?
The value of your tuition plan can be used at any qualified higher education institution in the country and abroad. If the tuition is more expensive than the contract value, the family will have to make up the difference.
What if a student decides to attend an out-of-state school?
The student can still use KAPT benefits. KAPT will pay the value of the tuition purchased under a purchaser's tuition plan, and if the out-of-state tuition is more expensive than those rates, the family will have to make up the difference through other means. Remember, KAPT benefits can be applied to any qualified institution of higher education, public or private, anywhere in the country.
What happens if I move out of state?
Movement out of state will not affect your KAPT account and will not affect the value of your tuition plan. If a student attends a Kentucky public college or university as an out-of-state student, and the out-of-state tuition charges exceed the value of the plan, the student will be responsible for the difference.
Are transfers among different types of schools permitted after a student enrolls?
Yes. Transfers among colleges and universities are permitted, and any unused benefits under the contract can be used at the new college or university.
If I cancel my contract, may I get back into the program at a later date at the same price?
No.
How many years of tuition can I purchase?
A total of five tuition years among the three KAPT plans may be purchased for one beneficiary by the same purchaser or different purchasers. Only two years of tuition may be purchased under the Value Plan for the same beneficiary.
Once I open a KAPT account, can I purchase additional years of tuition in the future?
No.
Can the purchaser of my account be changed?
Yes. Depending on the reasons for the change request, certain documentation and fees may be required.
Can I change the beneficiary on my account?
Yes, as long as the new beneficiary is an eligible member of the family of the current beneficiary.
KESPT and Other Education Savings Plans
How is KAPT different from Kentucky’s Section 529 savings program?
The Kentucky Education Savings Plan Trust (KESPT/KY Saves 529) is Kentucky's qualified state tuition “savings” program under Section 529 of the Internal Revenue Code and is also administered by the Kentucky Higher Education Assistance Authority. KESPT/KY Saves 529 offers three investment options, and there is no guarantee that account savings will cover higher education expenses. Savings in KESPT/KY Saves 529 can be used for the full-range of college expenses (tuition and fees, room, board, books, and supplies). KAPT, by contrast, guarantees the future payment of tuition in the Value and Standard Plans. Different families have different needs—some like the flexibility of the savings program; others, the discipline and guarantee of KAPT. KESPT/KY Saves 529 and KAPT should be considered complementary because they help families cover the full range of higher education costs. That's why numerous other states have both a prepaid and a savings option in place. Individuals may choose to participate in either KAPT or KESPT/KY Saves 529, or both. To request more information about KESPT/KY Saves 529, call 855-840-4855 or visit www.kysaves.com.
Administrative Fees
What administrative fees will I have to pay?
A list of KAPT administrative fees can be found in the Fee Schedule.
Refunds
What if the student decides not to go to college?
KAPT contract benefits may be transferred to a member of the family of the beneficiary.
A final option is to cancel the entire contract. See information below regarding cancellations.What happens if I cancel my KAPT contract?
A purchaser may cancel a contract at any time.
If you cancel before July 1 of the projected college entrance year, you will receive a refund of payments made minus administrative and cancellation fees.
If you cancel on or after July 1 of the projected college entrance year, you will receive the tuition payout value of the account at that time minus administrative and cancellation fees and any benefits already used. Earnings that are refunded will be subject to federal and state income taxes and a 10 percent federal tax penalty.
If you cancel due to the death or permanent disability of the beneficiary, you will not be charged the cancellation fee or the 10 percent federal tax penalty. Earnings that are refunded will be subject to federal income taxes.
What if my beneficiary receives a scholarship?
If your beneficiary receives a scholarship for qualified higher education expenses, you may request a refund of your account up to the amount of the scholarship without being charged the cancellation fee or the 10 percent federal tax penalty. Earnings that are refunded due to scholarship will be subject to federal income taxes. Keep in mind that KAPT funds can be used for all qualified higher education expenses, so if your beneficiary receives a scholarship that covers tuition, your KAPT funds could still be used for other expenses like room, board, books, and supplies or graduate school.
Tax Issues
What are KAPT’s tax advantages?
KAPT offers significant tax advantages. Earnings on your KAPT account are tax free at both a state and federal level when used for qualified higher education expenses.
What are the gift tax implications for a KAPT account holder?
Contributions to KAPT are considered a completed gift for gift tax purposes. No federal gift tax would be imposed on a purchaser for gifts to a beneficiary which do not exceed the annual gift tax exclusion amount. As with any personal tax questions, it is important to consult your tax advisor.
KAPT Board of Directors
KHEAA/KHESLC/KAPT Board Meeting Schedule
Megan C. Bailey
Program Committee Chair
Educator, Warren County Public Schools
Bowling Green
Andrew Brennen
Kentucky Student Voice Team
Lexington
Ellen Cartmell
Program Manager
Kentucky Department for Public Health
Maysville
Leslie Combs
Secretary-Treasurer
Retired State Legislator
Lexington
John Dougherty, Jr
Past-Chair
Louisville Paving & Construction
Louisville
Cathe Dykstra
Family Scholar House, Inc.
Louisville
Dr. Carl P. Rollins
Chair-Elect
Retired, CEO/Executive Director, KHEAA/KHESLC
Midway
Greg Roush
Chair
Retired High School Principal
Frankfort
Rita Smart
Finance and Audit Committee Chair
Retired State Legislator
Richmond
Ex Officio Members
Mason Dyer
President
Association of Independent Kentucky Colleges and Universities
Frankfort
Holly M. Johnson
Secretary
Finance & Administration Cabinet
Frankfort
Robbie Fletcher
Commissioner
Kentucky Department of Education
Frankfort
Mark Metcalf
State Treasurer
Frankfort
Dr. Aaron Thompson
President
Council on Postsecondary Education
Frankfort
