Eight Unexpected Uses of a 529 Plan


Eight Unexpected Uses of a 529 Plan


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The oft-used cliché “The only certainty in life is uncertainty,” rings true when it comes to educational expenses. As education options continue to expand from the traditional undergraduate model, the list of qualified expenses you can use a 529 plan to pay for has grown as well. Today, a 529 education savings account with The Education Plan® covers much more than standard undergraduate tuition, room and board, and books.

This will come as good news if the student you’re saving for plans for a non-traditional educational approach after high school, such as an apprenticeship program, or if you have educational expenses before they hit college, such as K-12 tuition. If you’re saving for a child or other relative's education through a tax-advantaged 529 plan, or if you’re considering opening a 529 plan, there are many qualified educational expenses you might not know about. These include:

  1. Online Colleges. Naturally, this option includes online courses offered by established academic institutions. However, it also covers accredited online universities and college programs.
  2. Trade Schools and Community Colleges. Beauty schools, air conditioning and refrigerator repair, massage therapy, I.T. training, and automobile repair – accredited versions of all these trades are allowable uses of 529 funds, as are community colleges that offer academic and trade programs.
  3. Graduate Schools. 529 eligibility doesn't stop after your child completes a four-year undergraduate degree. Medical school, law school, MBA programs, as well as master's and doctorate degrees in a range of academic disciplines also qualify.
  4. International Schools and Study Abroad Programs. Studying abroad used to be considered a luxury that only select few students could enjoy. But you can use a 529 plan to pay for programs at hundreds of schools worldwide from the U.K. to Switzerland to Australia. You can use 529 plan funds to pay for study abroad expenses if the study program at the foreign institution is eligible for credit at the student's US home institution, and if the foreign institution is eligible for Title IV federal student aid, which can be determined by looking for the federal school code. Keep in mind that 529 funds cannot be used to cover travel expenses such as airfare for study abroad programs.
  5. Gap Year Programs. Certain Ivy League schools, as well as certain state universities, have begun offering structured gap-year programs for credit by partnering with higher education institutions to qualify for funding from 529 accounts. This is typically the case when a gap year program offers college credits in conjunction with a college program. One private university, for example, offers a 9-month, tuition-free gap year program that sends students on service projects to China, Bolivia, India, Indonesia, and Senegal. As long as the program offers credits through an accredited institution, it will likely be permitted as a qualified expense, but make sure to check with the program coordinator to be sure before withdrawing funds from your 529 for a gap year program.
  6. K-12 Tuition. This may be the happiest surprise for many families. For parents who want a private school education for their child, 529 savings can be tapped for kindergarten through high school tuition at many institutions. Signed into law in 2017, The Tax Cuts and Jobs Act permits families to use 529 plans to cover up to $10,000 in tuition at private K-12 schools. However, books, room/board, and other expenses (including those covered for college students) don't qualify.

Improve Your Beneficiary's Balance Sheet

Some families might be concerned that unused 529 funds could go to waste or be penalized. Don’t worry, there’s good news. Over the past few years, new federal legislation has allowed savers to use 529 funds for additional purposes. Two of the biggest are:

  1. Student Loans. Up to $10,000 of 529 funds can be used to pay down federal and private student loans taken out by 529 beneficiaries or their siblings. Note that the funds can only be used to pay for eligible student loans and cannot be used to pay down credit card balances, personal loans, or other debts.
  2. Roth IRA Rollover. Beginning January 1, 2024, you can transfer up to a lifetime limit of $35,000 (over the course of 5 years) in unused 529 account funds to a Roth IRA owned by the 529 plan's designated beneficiary, with a few caveats. The 529 plan must be open for the designated beneficiary for at least 15 years, and any contributions made within the last five years, and the investment earnings associated with them, can’t be rolled over tax free. There are other important provisions that apply under the Secure 2.0 Act.

Six Expenses 529 Funds Don't Cover

When you’re planning your student’s education budget, be mindful that funds from 529 plans cover a lot, but they don’t cover everything. While the scope of allowable expenses continues to expand, some costs closely or distantly related to higher education and job training programs ARE NOT covered by tax-advantaged 529 plan funds. These include, but are not limited to:

  • Transportation Expenses
  • Smartphones
  • Clothing
  • Gaming computers or other tech not directly related to schoolwork
  • Insurance Premiums
  • Gym memberships, yoga classes, or equipment for extracurricular sports

Start Saving for Your Child's Tomorrow Today

The benefits are extensive, and getting started is easy. If you haven't opened a 529 plan for a child, family member (or even for yourself) it's easy to do, and it’s never too late to get started.

Visit our Learning Center for more information on saving with a 529 plan, including instructions on how to open an account, ideas for saving, when and how to take withdrawals, how to choose or change a plan beneficiary, and more.

Ready to get started? You can open your account in about 15 minutes.


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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

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The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

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