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No. Funds can be used to pay for tuition, fees, textbooks, supplies, computer and internet, and equipment that are required for the designated beneficiary to attend an eligible institution. If the student's enrollment qualifies for at least half-time, room and board expenses are also eligible up to a specified level. The U.S. Department of Education determines an eligible institution as an accredited, public, nonprofit and proprietary post-secondary educational institutions. To find out if a specific institution is eligible, review the Federal School Code database. Also, if the institution has been assigned a federal school code by the Department of Education, then it is considered eligible under Section 529.
Non-qualified distributions are withdrawals made for purposes other than for qualified higher education expenses. Exceptions include withdrawals relating to the death or permanent disability of the beneficiary.
You remain in control of the account. You, as the account owner, may either change the beneficiary to another family member, yourself or close the account. If the account is closed, the funds are subject to a non-qualified distribution penalty in addition to tax reporting.
The account owner may withdraw funds at any time. The account balance with earnings will be refunded. However, this refund is subject to a federal non-qualified distribution penalty equal to 10% of earnings. CD early redemption penalties may also apply.
Yes. The account owner and beneficiary may be changed to certain other family members. There is no fee for the first change of owner or beneficiary. Thereafter, a $50 fee may be imposed for each change.
Program assets will be considered if the student applies for state or federally sponsored financial aid or scholarships. If the account is owned by the parent, account balances are generally included in the asset of the parents rather than the student. Beginning July 1, 2009, section 529 accounts owned by or for the sole benefit of the student (such as custodial accounts) also will be treated as assets of the parents for federal financial aid calculations. (As a result of a peculiarity in the Higher Education Act of 2005, until July 1, 2009, student owned section 529 accounts (such as in a custodial account) will not be treated as the student's or parent's assets for financial aid purposes.) Section 529 account distributions that are not included in taxable income are not treated as student or parent income for purposes of federal financial aid calculations. An account owner should check the applicable rules for financial aid programs and scholarship programs before withdrawing funds to pay qualified higher education expenses.