College students may not like the shift to online classes this fall—but there could be a silver lining: spending less money on room and board. While some schools aren’t offering housing refunds, you may get your money back—which could mean leftover money in your 529 college savings account. Thanks to the SECURE Act, you may now have more options for using your 529 plan—like paying for student loans and certain apprenticeship programs. Here’s what to know about how it works.
New ways to use 529 college savings plan money
You can now use up to $10,000 from your 529 college savings plan to pay off student loans without paying penalties or taxes. It’s also possible to change the names—aka the beneficiaries—on a 529 plan to a parent’s name. This allows you to use up to $10,000 to cover the cost of federal or private student loans taken out in a parent’s name.
529 college savings plans only cover qualified education expenses—so you can’t use them to pay for everything—but the new law offers a workaround. You may use student loans to cover non-qualified expenses—like healthcare or transportation—and then you may use your 529 plan to cover up to $10,000 of these student loans.
Another lesser-known perk: You may also use 529 college savings to pay for apprenticeships, which could offer hands-on work experience. To qualify, your apprenticeship must be registered with the Department of Labor. You can find out if your apprenticeship is eligible here.
Other reasons you may have leftover 529 funds
The coronavirus pandemic isn’t the only reason why families may have extra money in a 529 college savings plan. You may have leftover funds if a child skips college, qualifies for a full scholarship or picks a cheaper school. You may also have more 529 money if the stock market performs better than you expected. Either way, it’s never too early to start planning how you’re going to use those funds.