Thanks to the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, 529 plan holders can make penalty-free withdrawals to pay off student loan debt for the designated beneficiary and each of their siblings, up to a lifetime maximum of $10,000 per person. That's not quite the same as erasing $10,000 in student loan debt, but the tax advaꦑntages of 529𝔉 plans help stretch your savings further.

What Is a 529 Plan?

A 529 plan is a type of 澳洲幸运5官方开奖结果体彩网:tax-deওfe🐠rred education savings account. Established by Congress in 1996, each 529 plan is administered by a state or educational institution. These accounts allow you to avoid federal and (usually) state income taxes on the account’s earnings, so long as withdrawals are used for 澳洲幸运5官方开奖结果体彩网:qualified education expenses. You can typically choose a 529 plan outside of your home state, but additional state tax benefits might only be available to local residents.

A 529 plan can be set up on essentially anyone’s behalf. Alternatively, you can open your own 529 account if you're at least 18 and then name yourself as the 澳洲幸运5官方开奖结果体彩网:beneficiary, which might be a good idea if you're saving money for graduate, law, or medical school.

Certain 529 plans let you essentially prepay for future tuition costs at today's prices, but only a small number of states and education institutions offer this type of account. Additionally, some of these plans limit which colleges and universities they can be used to pay for.

SECURE Act of 2019

While 529 plans are primarily intended to pay for higher education expenses, a big change came in 2019 with the passage of the Setting Every Community Up for Re🎶tirement Enhancement (SE𓆉CURE) Act.

Specifically, it allows for 澳洲幸运5官方开奖结果体彩网:penalty-free 529 distributions for the purpose of repaying a beneficiary's 澳洲幸运5官方开奖结果体彩网:student debt, up to a lifetime limit of $10,000. The SECURE Act also allows for additional withdrawals of up to $10,000 for each of the beneficiary's siblings. For example, a family with three kids could withdraw a𒊎 total of $30,000.

Another change that the SECURE Act made to 529 plans is that now certain apprenticeship expenses, such as fees, books, and supplies, are considered qualified education expenses.

Other Laws Affecting 529 Plans

In addition to the SECURE Act of 2019, there have been a few other laws over the years that expanded the functionality of 529 plans. For example, thanks to the Tax Cuts and Jobs Act (TCJA) of 2017, 529 plans can be used to pay for up to $10,000 per student in K–12 tuition each year.

More recently, the 澳洲幸运5官方开奖结果体彩网:SECURE 2.0 Act of 2022 made it so up to $35,000 can be rolled over from a 529 plan into a Roth IRA. However, the rollovers are still subject to annual Roth IRA contribution limits, and the 529 plan must have been open for more than 15 years.

The Bottom Line

Thanks to legis𝓀lative changes over the years, 529 plans can be used for more than just higher education expenses. Now, up to $10,000 per person can apply toward the student loans of a beneficiary and each of their siblings. F🍷unds from a 529 plan can also be used to pay K–12 tuition or rolled over into a Roth IRA

These options can be lifesavers for anyone with more money iܫn their 529 account than expected. Without them, it wouldn’t be possible to withdraw any leftover funds after the beneficiary graduates without tꦍhem being subject to taxes and the 10% penalty. Ultimately, 529 plans were already solid college savings vehicles, and the additional flexibility granted by the aforementioned acts makes it that much easier to get the most out of your money.