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Are You Wondering How to Use a 529 College Savings Plan?

If your child is headed off to college, congratulations to them on their achievement. And for those of you who saved money in a 529 college savings plan over the years, congratulations to you as you reap the benefits of those savings. (If you don’t yet have children in college, consider this a motivating boost to start saving ASAP.)

Your education fund might be even more worthwhile than you had expected, says the executive director of the Ohio Tuition Trust Authority, Tim Gorrell, who manages the overall operations of Ohio’s 529 Plan, College Advantage. In fact, he finds that many parents don’t realize how flexible 529 funds can be.

Read on to discover some of the big and small ways 529 funds can be allocated, and learn ways to make sure you’re properly accessing and accounting for them when paying for college.

Top Ways to Use a 529 Savings Account

1. The “Big 4”

Most often 529 funds are used to help pay for traditional college expenses: tuition, fees, dorm rooms, and meal plans, providing peace of mind that the major education expenses are covered.

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2. Course materials

Funds can also be used for computers, textbooks, and virtually any expense required by the degree or certificate program. Some expenses might not be obvious. “They could include, for example, art supplies for a design student, a stethoscope for an aspiring nurse, or an instrument for a music major,” Gorrell points out.

3. Off-campus housing and food

Many parents don’t realize their student doesn’t have to live on campus to use 529 funds. The funds can be applied toward housing and food expenses incurred during the school year wherever they live. “Realistically you can take up to the amount the university would charge if you were living on-campus as a qualified distribution,” explains Gorrell.

4. Expenses beyond four-year schools

While you might typically associate 529s with four-year colleges and universities, the accounts also can be used for two-year community colleges, certificate programs, and post-graduate school. And, thanks to the 2019 SECURE (Setting Every Community Up for Retirement Enhancement) Act, they can even cover the upfront costs of apprenticeships, such as textbooks, fees, required tools, and safety equipment.

5. Loans

Another provision of the SECURE Act allows the repayment of up to $10,000 worth of education-related loans. “Many people are relying on loans for college expenses, but some receive an unexpected scholarship or start saving after they took the loan to enjoy 529 tax advantages, such as the Ohio $4,000 tax deduction,” says Gorrell. “They may wind up with money left over in their 529 fund, and now they can apply it to repaying those loans.”

6. How to Tap the Funds

Now that you know how you can spend the funds, you might be wondering how to access the account. Your first step is remembering how you invested. With Ohio’s College Advantage, for example, you might have enrolled directly and managed the funds yourself, or you might have enrolled through a broker or financial advisor. Don’t worry if this is your first time calling. “We recognize our account owners may have started the 529 when the beneficiary was very young, and we haven’t heard from them since,” says Gorrell.

Fortunately, at least with the Ohio 529 plan, making an online withdrawal request is easy – you just need to input your account number, then complete the two-factor verification for security, and now you’re authorized to withdraw. After that, you can send the funds directly to the institution via electronic transfer or you can have the money sent to your bank account so you can pay the expenses (such as rent or food bills) yourself.

How and When to Report 529 Withdrawals

Any 529 withdrawal activity will generate a 1099Q for tax purposes. If the expenses incurred are less than your withdrawal amount, you have to report the unused amount as “Other Income.” If you spend more than you withdraw, no reporting is necessary.

But because the IRS can audit your return years later, be sure to save receipts and organize them by semester so anyone reviewing your account can quickly calculate the total amount of qualified expenses these funds covered

The bottom line is that 529s are flexible and easy to access, Gorrell emphasizes. “Parents may not know the details of their child’s future plans, but remember your child is likely to do something after high school – and it’s likely to cost something. A 529 plan is a great way to cover those expenses in a tax-advantaged way.”

Cathie Ericson is a freelance writer based in Portland, Oregon, and mom of three teen boys. Read more about Cathie at

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