You Can Use Your 529 Plan to Pay Off Your Student Loan
College students may not like switching to online classes this fall, but there may be a silver lining here: spending less money on room and board. While some schools do not offer housing reimbursement , you may get your money back, which could mean the balance in your 529 college savings account. Thanks to the SECURE Act, you now have more options for using your 529 plan, such as paying student loans and certain apprenticeship programs. Here’s what you need to know about how it works.
New Ways to Use Money for the College Savings Plan 529
You can now spend up to $ 10,000 from your 529 College Savings Plan to pay off student loans without paying fines or taxes. It is also possible to change the names – also called beneficiaries – in the 529 plan to the name of the parents. This allows you to use up to $ 10,000 to cover the cost of federal or private student loans in your parent’s name.
The 529 college savings plans only cover the cost of qualified education – so you can’t use them to pay for everything – but the new law offers a workaround. You can use student loans to cover unqualified expenses like healthcare or transportation, and then you can use your 529 plan to cover those student loans up to $ 10,000.
Another lesser known benefit: You can also spend 529 of your college savings on internships that practical work experience can offer. To qualify, your apprenticeship must be registered with the Department of Labor. You can find out if your training is suitable here .
Other Reasons You May Have 529 Funds Left
The coronavirus pandemic isn’t the only reason families may have some extra cash in the 529 college savings plan. You may have leftovers if your child skips college, gets a full scholarship, or chooses a cheaper school. You can also have more than 529 money if the stock market is performing better than you expected. In any case, it is never too early to start planning how you are going to use these funds.