Using 529 College-Savings Plan Money for Part-Time Students

Even room and board counts as an eligible expense for half-time students. And the college doesn’t have to be a four-year institution.

Jar with label college and money.
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I read your article about 529 withdrawals for a computer and had a question about eligible expenses. My daughter goes to a community college. Can I withdraw money from her 529 for her tuition and other expenses, or does she have to attend a four-year college to be eligible? Also, does she need to be a full-time student to qualify?

You can use your 529 savings to pay eligible expenses at a community college, even if your daughter attends part-time. Money from the account can be used at any college, university, vocational school or other postsecondary educational institution that’s eligible to participate in a student aid program administered by the U.S. Department of Education. That includes virtually all accredited postsecondary institutions in the U.S. and some colleges outside of the U.S., too, says Mary Morris, chairman of the College Savings Foundation and CEO of the Virginia 529 College Savings Plan. You can look up eligible schools using the Department of Education’s federal school code database, or ask the school if it is eligible.

A student doesn’t need to attend full-time to use 529 money for tuition, fees, and required books and supplies. And the new law lets you withdraw 529 money tax-free to purchase a computer, printer, scanner, related equipment and software, and Internet access. The computer-related items qualify as long as they are used primarily by the 529 beneficiary while enrolled at the eligible institution.

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To use 529 withdrawals for room and board, however, the student needs to be enrolled in at least half of the full-time academic workload for the course of study he or she is pursuing (as determined by the school). As long as your daughter is at least a half-time student, you can use 529 money to pay for her expenses, even if she lives off campus. Eligible expenses can’t exceed the college’s allowance for room and board included in the cost of attendance for federal financial aid purposes. You can usually find that figure on the college’s website, or you can get it from the financial aid office.

For more information about 529 plans, see The Best 529 College-Savings Plans. Also see IRS Publication 970, Tax Benefits for Education (the “Qualified Tuition Program” section covers the 529 rules).

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.