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How to use your 529 plan to pay for college

College • July 17, 2019 • Jen Ryan


What you’ll learn

  • All about qualified education expenses
  • Your payment options
  • The importance of “when” to use your 529 funds


Ready to use your 529 funds to pay for college? Here’s what you need to know.

Just like your 529 savings account has rules around how you save, it also has rules around how you use it to pay for college. Before you tap into your 529 account for the first time, you’ll want to know how to withdraw and use your funds without getting hit with tax penalties. So, we called in an expert to break down what you need to know. Peg Creonte is Senior Vice President of Business Development at Ascensus College Savings, which specializes in 529 plans.

What expenses can I use my 529 account for?

If you thought your 529 account only covers tuition, think again.

“529 plans cover a wide variety of education-related expenses, including tuition, mandatory fees, books, computers, certain room and board costs, and even equipment that may be required for enrollment or attendance,” says Peg.

You generally won’t pay federal and state taxes on the money you withdraw from your account when you use it for these expenses, according to IRS.gov. So, if your designer-in-training needs Adobe software and a printer, your 529 account can cover it.

Most 529 accounts can also cover an off-campus apartment if your future freshman isn’t living in a dorm, but the cost of off-campus housing must be comparable to the on-campus costs. Check with your 529 provider if your student plans to live off-campus.

What doesn’t count as a qualified expense?

“529 plans don’t cover things like travel costs or fraternity and sorority fees,” Peg says. “But, the vast majority of expenses are covered. As long as you’re using your 529 plan funds for qualified expenses, you shouldn’t encounter any unexpected fees or penalties.”

If you have any questions about whether an expense qualifies, reach out to your plan provider directly. It’s better to ask now than get hit with tax penalties later.

Although you don’t need to report your expenses to your 529 plan provider, keep your receipts in case the IRS audits you.

Can I pay right from my 529 account?

Chances are, no.

“Only a few schools offer the capability to transfer funds directly from your 529 plan,” says Peg. “In most instances, you’ll need to withdraw the money and then pay.”

Check with your plan provider and your child’s college to see what they allow. (If you have an Ascensus plan, they do allow direct school payments.)

Can I keep contributing while my student’s in school?

“Absolutely!” Pegs says. “Parents can keep contributing money to their 529 as their child advances through school. Again, circumstances are different for different families. Some families continue to save for graduate school. 529 plans are so flexible in their usage that some families choose to integrate a 529 into their savings plan even as their beneficiary ages past college.”

One important thing to remember if you keep saving? 529 accounts are long-term savings vehicles. The money you contribute now may not yield a big return if you plan to use it in the next year.

Any last things I should know?

Make sure to pay attention to when you pay for college expenses.

“Be certain that the expense is paid for in the same year you take the distribution to ensure you don’t incur tax penalties,” Peg says.

And that’s it. The other stuff—like how much of your funds you use each semester—is up to you. Do what makes sense for your family and remember to take a moment to be proud of all your hard work and planning. After all, helping your child get a college education is what you were saving for!


Jen Ryan is a senior copywriter at Sallie Mae. When she’s not helping make college happen, you can find her reading, running, or exploring Boston with her husband.


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Sallie Mae does not provide financial, tax, or legal advice and the information contained in this article does not constitute tax, legal, or financial advice. Sallie Mae does not make any claims, promises, or guarantees about the accuracy, completeness, or adequacy of the information contained in this article. Readers should consult their own attorneys or other tax advisors regarding any financial strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Sallie Mae.

Please note, Winnie Sun was compensated by Sallie Mae for this article but the views and opinions expressed herein are her own.