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How do I use my 529 money for college?

December 14, 2018

Before spending any money from your 529 plan, you should do some prep work to ensure that you are only spending on qualified educational expenses and that you don’t exceed the amount you will need as projected by your college or university.

Step 1: Review Your Financial Aid Award Letter

It’s important to review your financial aid award letter, even if you choose not to accept financial aid. The award letter contains important information about tuition and fees, room and board, and other educational expenses (Note: If you choose not to apply for financial aid, you can contact your college’s Office of Financial Aid for assistance). After determining how much items will cost, add your personal expenses, and create a college expense budget.

Step 2: Calculate The Amount of Funds You Can Use for Your 529

Remember, for withdrawals to qualify as penalty and tax-free distributions, your 529 spending cannot exceed the cost of Qualified Higher Education Expenses (QHEE). To determine these costs, first, add the estimated cost for the school year as determined by your institution. Next, deduct any grants, scholarships, and other forms of tax-free aid provided. The amount remaining is what you can use from your 529 funds.

Example: Calculating How to Use 529 plan for QHEE

Estimated Cost of Attendance (As Provided by College)








Qualified Higher Education Expenses

Also, it’s important to remember that money from a 529 College Savings Plan may only be used on qualifying expenses, which include the following:

Tuition and Fees

Tuition and school fees are the most popular use of 529 plans. Using the account to pay for these expenses is usually straightforward. However, it’s important to remember that money from a 529 account cannot be used to pay for sports or club memberships and insurance.


Required coursebooks are a qualified higher education expense.


Computers, printers, software used to complete school work (Microsoft Word, Microsoft Excel, Microsoft PowerPoint), and internet all qualify as eligible expenses.


Any equipment needed to fulfill course requirements is covered. For example, if an art major requires an easel and painting supplies, it serves as an eligible expense.

Room and Board

Both on and off-campus housing are eligible expenses. However, it’s important not to exceed a) the estimated cost of room and board as determined by the institution’s financial aid office or b) the actual cost of room and board on campus. If you choose to find off-campus housing, ensure the cost is at or below the estimated price of room and board in the financial aid award.  In addition, only half and full-time students are eligible to use 529 money for room and board.

Spending Funds

When possible, the best way to use your 529 to pay for college is to transfer funds directly from your 529 plan to the institution. Retain records of transfers for documentation when filing your taxes.

In addition, you may also withdraw funds from the account and use them to pay for qualifying expenses directly. In this case, it’s best to purchase qualified higher education expense items separately from ineligible expenses. For example, if you are buying a computer, printer, and a computer game buy the game separately because it’s not a qualified expense.

When you file taxes, you’ll be required to account for each dollar and demonstrate it as a QHEE. If the amount exceeds what is allotted by the institution or the money is used on something that is not a QHEE, the amount will be subject to penalties and income tax. Using your 529 money for college is straightforward as long as you a) only use the money for qualified expenses, b) don’t exceed the amount of QHEE, and c) retain all receipts and documentation for expenses.