07.25.06 | I found an interesting article on nj.com this week…
I found an interesting article on nj.com this week, a news site dedicated to New Jersey, but the question bears looking at.
A consumer asks “Can money in a 529 college savings plan be used to pay charges for study abroad programs or to pay off Stafford Loans upon a student’s college graduation?”
Lets back up a step and talk about what a 529 savings plan is. Named after the section of the federal tax code that governs them, 529 plans are programs that help families save for college while offering tax advantages. Selecting a plan does requires homework – there are two types. All 50 states offer at least one 529 plan, and the tax advantages, investment options, restrictions, and fees can vary a great deal.
Before buying a 529 plan, you’ll want to compare and contrast the plan(s) you are considering. Request an offering circular or official statement from the plan sponsor or your financial professional or from the corporation’s website. You can find links to 529 plan Web sites on The National Association of State Treasurers’ College Savings Plans Network Web site or you can call them toll-free at 877-277-6496.
Now back to the question:
*Can a 529 plan be used to pay for a study abroad program?
Maybe. If the school is an accredited US institution and the entire check goes to that college, then you’re probably safe. If some of the money goes to an outside organization, then it might not be legal. You can look on the US Department on Education’s website and use the school-code lookup tool. If the school’s study abroad program has been assigned a code, you can assume it is eligible. However, you CAN NOT use the money to pay for transportation costs.
*Can a 529 be used to pay back a Stafford Loan?
No – money from a 529 cannot be used to repay a Stafford Loan or any other federal financial aid.