529 question: Are stipends given for MD-PhDs considered as scholarships ?

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indexlover
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529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by indexlover » Sat Nov 04, 2017 11:10 am

Are stipends given for MD-PhDs considered as scholarships?

My DD ( still a senior) got multiple scholarship for her Undergraduate degree. Pretty much a full ride. I didn't use 529 $$ for books, and miscellaneous small ticket items. I was saving it for her MD ( medical school) but she is interested only in MD-Phd programs. She has been invited to multiple good schools for interviews so chances are very high that she will get in to one of the prestigious well funded programs. I am confident because she has an excellent resume and the interviews have gone well. If she is successful with her admissions she will be getting stipends for her studies.

I have an over funded 529 account ( I have another kid but his 529 is also fully funded). Are stipends in the MD-Phd considered as scholarships ? I want to gradually withdraw from the 529 and deposit in to her account ( lower tax bracket for her) over the course of her MD-PhD. If MD-Phd Stipends are not considered as scholarships, I think i will incur a 10% penalty ( in addition to taxes). Will she have expenses for her Md-Phd that can be paid with her 529 ?

TIA

Raryn
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by Raryn » Sat Nov 04, 2017 11:58 am

In the MD/PhD one program I am personally familiar with, the stipend was not a scholarship. It was income.

The tuition waiver may or may not be a scholarship.

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HueyLD
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by HueyLD » Sat Nov 04, 2017 12:40 pm

Stipends can mean scholarships. The usual rule is that if the student is required to perform services such as teaching, research or other services as a condition of receiving such payments, the stipends will be taxed as wages.

If your DD's stipends are taxable, then the stipends will not reduce your ability to use 529 funds for "qualified" expenses.

Keep in mind that qualified expenses for 529 funds go beyond tuition and required enrollment fees. You can also include books, supplies, equipment and room & board (if at least half-time student).

If you really need to use up the 529 funds, you can choose to include part of the otherwise tax free scholarships in your DD's income. If he is still your dependent, it will get a bit complicated.

Consult a tax professional or do several simulated tax returns on your preferred software.

MnD
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by MnD » Sat Nov 04, 2017 1:17 pm

PhD level student stipends are generally binned as earned income for work performed and the various waivers (tuition, fees) are binned as scholarships.
A fully funded grad student has sufficient stipends and waivers to cover all grad school and living expenses.
But I don't see why you can't at least withdraw room and board and any educational expenses not covered by waivers from the 529.
The stipend is looked at as earned income working as a research assistant. It should not preclude withdrawals from 529 for 529 qualified expenses like room and board even if it would not be necessary to do so.

I'm sure you're also aware the 529 tax owed and penalty for non-qualified withdrawals is just on the earnings built up in the account?
In some cases the earnings are pretty low relative to balances depending on what the investments were and how old the account is.

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neurosphere
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by neurosphere » Sat Nov 04, 2017 1:37 pm

Remember, most fully-funded MD/PHD programs (such as MSPT programs) essentially have two components:

1) A scholarship which covers tuition and fees
2) A stipend which pays for room/board/other

#1 can effectively be called a "scholarship" and is not taxable.
#2 is always taxable as income regardless of what it's "called", as it's not applied to required tuition and fees (now, whether FICA is charged to this amount can vary based on the details of the funding and obligations).
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dbltrbl
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by dbltrbl » Sat Nov 04, 2017 1:42 pm

Just call up her undergraduate school, if they have MD-PHD and speak to some one higher up in payroll. That is most reliable. Alternatively, wait till she chooses a school than call them. Universities codes will decide scholarship, wages or some combination.

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neurosphere
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by neurosphere » Sat Nov 04, 2017 1:50 pm

indexlover wrote:
Sat Nov 04, 2017 11:10 am
If MD-Phd Stipends are not considered as scholarships, I think i will incur a 10% penalty ( in addition to taxes). Will she have expenses for her Md-Phd that can be paid with her 529 ?
She will have some sort of scholarship which pays for 6-12 years of tuition (graduate school tuition plus medication school tuition). My MD/PHD took 10.5 years. :annoyed

Is the 529 balance higher than even 6+ years of graduate/medical school tuition, such that you need to also include room/board as qualified 529 expenses?

sciliz
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by sciliz » Sat Nov 04, 2017 2:06 pm

Looking at the numbers for the MD/PhD program at the university I work for, it looks like the stipend is $31k, and the cost of attendance is $55k tuition (waived) and $29-36k in other expenses. So there might be up to a ~5k gap some of the years that someone would be eligible for a loan or you could apply 529 money to. Some places pad their total cost of attendance figures more than others, but I doubt there'd be much you could funnel to her in that case. She'll just have to take a couple of law classes while she's there :wink: She'll have lots of time, right?

(also, holy wow are those MD/PhD programs a good deal!)

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Veiled
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by Veiled » Sun Nov 05, 2017 3:15 pm

sciliz wrote:
Sat Nov 04, 2017 2:06 pm
(also, holy wow are those MD/PhD programs a good deal!)
Only if you want to spend ten years in training after college. And many MD/PhDs really struggle to use both degrees, ending up using just one or the other.
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by Afty » Sun Nov 05, 2017 3:49 pm

Veiled wrote:
Sun Nov 05, 2017 3:15 pm
sciliz wrote:
Sat Nov 04, 2017 2:06 pm
(also, holy wow are those MD/PhD programs a good deal!)
Only if you want to spend ten years in training after college. And many MD/PhDs really struggle to use both degrees, ending up using just one or the other.
+1. My friend did an MD-PhD and is now a radiologist, which he could have done with an MD alone. An extra four years of income as a radiologist is worth a heck of a lot more than four years of tuition plus stipend.

need403bhelp
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by need403bhelp » Sun Nov 05, 2017 8:03 pm

One interesting quirk at least for the MD/PhD program I completed - I paid income tax on my stipend but not Social Security tax. Thus, despite years of "income," did not meet the 40 quarters requirement for SS when I finished.

mudphudder
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by mudphudder » Mon Nov 06, 2017 12:18 am

I'm a current MD-PhD fellow. The scholarship portion, which covers tuition and fees, is not taxable as income. The stipend which is for living expenses is taxable but is not "earned" income in most situations. This means that she will owe federal, state and possibly local income taxes but NOT FICA taxes. It's nice in the short term because that's an extra 2 to 3K per year that she can use but it also means that we're ineligible to contribute to tax advantaged accounts and our earnings during the program don't count towards social security.

If I were you, I would still look at whether you can use the 529 money. I'm technically eligible for around 6k or 7k of student loans per year, which I don't claim because I don't need them. That makes me think she may still be able to utilize some of that 529 money. At the very least she will have books to buy, clinical equipment, and licensing exam fees which are likely eligible expenses.

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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by triceratop » Mon Nov 06, 2017 1:33 am

need403bhelp wrote:
Sun Nov 05, 2017 8:03 pm
One interesting quirk at least for the MD/PhD program I completed - I paid income tax on my stipend but not Social Security tax. Thus, despite years of "income," did not meet the 40 quarters requirement for SS when I finished.
This is true for even some Ph.D. program stipends, depending on the source of funding. (the downside is the earnings are not IRA-eligible either)
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NotWhoYouThink
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by NotWhoYouThink » Mon Nov 06, 2017 10:27 am

OP's question was about scholarships and whether 529 money could be withdrawn without penalty, right? It sounds like a MD PhD program tuition waiver would count as a scholarship for 529 penalty-free withdrawal purposes. Taxes would still be due on any portion that was considered earnings.

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neurosphere
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by neurosphere » Mon Nov 06, 2017 1:27 pm

NotWhoYouThink wrote:
Mon Nov 06, 2017 10:27 am
OP's question was about scholarships and whether 529 money could be withdrawn without penalty, right? It sounds like a MD PhD program tuition waiver would count as a scholarship for 529 penalty-free withdrawal purposes. Taxes would still be due on any portion that was considered earnings.
In my MSTP MD/PhD program, money came directly as a grant to NIH and was paid to the school to cover tuition. In this sense, there was not a "waiver" as I understand it. The school received the money, and could then select students whose tuition could be paid by the grant. That sure sounds like a scholarship to me! :D

Other schools that have "internal" or self-funded MD/PhD programs are more likely to have a "waiver", in that the school does not charge itself tuition. But they select students to receive tuition-free education. So isn't that also a scholarship? What else would one call it?

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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by CedarWaxWing » Mon Nov 06, 2017 2:23 pm

Veiled wrote:
Sun Nov 05, 2017 3:15 pm
sciliz wrote:
Sat Nov 04, 2017 2:06 pm
(also, holy wow are those MD/PhD programs a good deal!)
Only if you want to spend ten years in training after college. And many MD/PhDs really struggle to use both degrees, ending up using just one or the other.
My son is in a Phd program, at a medical university, and did a lot of asking around about this...

It turns out that most of the MDs with Phds are practicing medicine and not doing research. He decided to do only a Phd... since the field of interest for him does not require an Md to be working at the med schools if he chooses to do that.

Many of his profs told him outright that if he is going to do the work his Phd qualifies him to do, the Md will not ad much to that but if he wants to take care of patients, he will need an Md. The field of the Phd research and the applications of that field might make a difference.

I have several friends with the md/phd combo... most of them, but not all, practice medicine just like the mds who have no Phd. Some work at directors at corporations who make drugs and other medical products, some work at the med schools and do split time between research and the practice of medicine. (But many Mds who do reseach at med schools do not have a Phd.)

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Veiled
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by Veiled » Mon Nov 06, 2017 8:21 pm

CedarWaxWing wrote:
Mon Nov 06, 2017 2:23 pm
My son is in a Phd program, at a medical university, and did a lot of asking around about this...

It turns out that most of the MDs with Phds are practicing medicine and not doing research. He decided to do only a Phd... since the field of interest for him does not require an Md to be working at the med schools if he chooses to do that.

Many of his profs told him outright that if he is going to do the work his Phd qualifies him to do, the Md will not ad much to that but if he wants to take care of patients, he will need an Md. The field of the Phd research and the applications of that field might make a difference.

I have several friends with the md/phd combo... most of them, but not all, practice medicine just like the mds who have no Phd. Some work at directors at corporations who make drugs and other medical products, some work at the med schools and do split time between research and the practice of medicine. (But many Mds who do reseach at med schools do not have a Phd.)
Your son was smart. I will admit, there are rare times when a dual-degree is useful. MD/PhDs, MD/JDs, MD/MBAs, and MD/MPHs occupy many management, administrative, and consultant positions in hospitals and industries as you mentioned. I think this is part self-selection (dual-degree physicians pursued that other degree for some reason, and MDs who really just wanted to do clinical work didn't, because they just want straight clinical medicine). But, part of it is the attraction of employers (hospitals, engineering companies, labs) to show off the extra degree to customers. So if you want a free ten-year education and also want to be a figurehead in your industry, a dual degree might be a good move.
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CedarWaxWing
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Re: 529 question: Are stipends given for MD-PhDs considered as scholarships ?

Post by CedarWaxWing » Tue Nov 07, 2017 1:23 am

Often the dual degrees opens doors and opportunities... and an Md may help to get the right grants for the Phd work.

I know a couple of Mds who later obtained a JD... thinking they would practice law and leave medicine. They both gave it a try and came back to be practicing Mds. As much as Mds complain about work conditions... it is pretty special and a great privilege to actually take care of people who need medical care... and after residency and about 10 years of working as an Md... most are pretty good at that. Good enough that few get as good at anything else they can try to do later. :)

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