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

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).