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529 Qualified Expenses: You May Be Surprised to Learn What’s Covered

By Diana Simeon

For years, the Taylor family of Solon, Ohio, carefully socked away savings in 529 accounts for their two daughters’ college educations. But when it came time for their younger daughter to leave the nest, she decided not to go to college: Instead, she pursued a professional ballet career. Three years later, she’s still dancing. She’s also working as a barista and taking online college courses paid for by her employer, Starbucks. So, what about the 529 account?

Many parents worry that they won’t be able to save enough for college, but is it possible to have too much saved? What if a child decides not to go to college, or they earn a lot of scholarship money? Not to worry: It turns out that college 529 plans are incredibly flexible if you know the 529 plan rules.

529 Qualified Expenses

Of course, 529 savings can be used for college tuition. But there are many other expenses that qualify, too.

“The short answer is you can pay for anything that is required by the college and included in their cost of attendance,” says Charlie Donaldson, founder of College Bound Coaching, which helps families with college funding.

Room and board, books, computers, and other supplies are all qualified expenses.

Parents can also use 529 savings to pay for fees, which can be significant, says Timothy Gorrell, executive director of the Ohio Tuition Trust Authority, which manages Ohio’s 529 plan, CollegeAdvantage.

“There are mandatory fees a school will charge that all students, regardless of their course of study, will pay,” explains Gorrell. “But specific courses may have additional technology or resource fees associated with them that may not have been anticipated. These are all qualified expenses.”

For example, nursing students are required to pay fees associated with their clinical work—sometimes hundreds of additional dollars—and fees for specialized medical equipment. Other majors can require lab or other fees.

Additionally, 529 account funds can be used to cover the costs of living off campus, up to the amount the college charges for room and board. The expenses of studying abroad are also eligible, so long as the program is through a U.S.-accredited higher education institution.

Not Just for Four-Year Colleges

Not sure what your kid will wind up doing? A 529 still offers flexibility. You can pay for more than just a traditional four-year college degree.
Take, for example, the Taylors’ young ballerina. Her 529 is paying for books and lab fees for the online university.

“You can use a 529 for trade school, a certificate program, community college, even graduate school,” says Gorrell. Whether it’s cosmetology or the culinary arts, a 529 can fund it, so long as the specific school or program accepts federal financial aid. The U.S. Department of Education website includes an extensive list of the programs and schools that accept federal financial aid.

According to the 529 plan rules, there’s also no deadline for using the funds in a 529. So anything left over after college (or another program) can be used for post-graduate education, whether that’s graduate school or other training.

Lastly, you can use the money in a 529 to send your student to school in any state. You don’t have to live there or have your 529 plan based there, says Gorrell.

Switch Beneficiaries? No Problem

Consider this: Your oldest child gets a lot of merit aid. He doesn’t need to use all the money in his 529 savings plan. Meanwhile, your youngest child gets no merit aid and doesn’t have enough money in her 529.

Solution? You can transfer funds from one 529 to another, whether that is a sibling or other qualifying relatives, like nieces, nephews, and even a parent, says Gorrell.

“I have actually seen a situation where a son ended up getting a lot of scholarship money,” recalls Donaldson. “The father changed the beneficiary to himself, and he went back to school.”

All those years of saving for college had paid off—with two educations instead of one.

Diana Simeon

Diana Simeon is an editorial consultant for Your Teen.