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529 Plan Qualified Expenses: What You Can Spend On Now

A student studying for a test.

With colleges delivering classroom instruction remotely or via a hybrid model as a result of the pandemic, many students are living at home or off-campus. The upside? Some families’ college costs have dipped this year. Others are still feeling the financial pinch. Here’s what to know about college costs and 529 plans now.

According to a recent survey, 46% of families paused or reduced contributions or planned to withdraw funds from their college savings accounts.¹ However, despite reduced costs for some families, college costs haven’t changed as much as you might think. That means saving for college is still as important as ever.

The number of families who paused, reduced contributions or planned to withdraw funds from their college savings account in 2020, mostly due to financial woes.*

The Cost of College in 2020 and Beyond

Many colleges opted to keep tuition rates flat for 2020-21, but some increased tuition and reduced some mandatory campus fees instead. A few colleges reduced tuition—some by 10%—but these institutions represent a minority.

By and large, cost-of-attendance rates remain similar to or greater than last year’s rates for students living on campus or in nearby off-campus housing.

Despite the complications of the pandemic, families continue to value higher education. Some 78% of students are continuing their college education, according to Sallie Mae’s 2020 How America Pays for College survey. On average, families are spending more on college this year than they did in the last two years.²

The average cost to attend a four-year public university is $22,180 a year and $50,770 a year for private.

Source: Trends in College Pricing, 2020, The College Board. October 2020.

If college families are spending less, that’s likely because their students are temporarily living at home while taking classes remotely. Colleges hope to have students back on campus soon (if they’re not there already), so the long-term cost outlook remains similar to the pre-pandemic trajectory. In other words, don’t skimp on your savings plan if you can afford to put money aside.

529 Plan Qualified Education Expenses

529 plans cover more than just tuition. Qualified education expenses include tuition, mandatory fees, computers, books, supplies, and room and board (must be enrolled half-time or more). 

Off-campus housing also counts as a qualified expense. You can use your 529 plan to cover rent, utility, and grocery bills up to the college’s allowance for room and board, which you’ll find posted on their website or by calling the financial aid office. 

Does Your Mortgage Count as Housing?
No. If your student is living at home, be aware you cannot use a 529 distribution to pay toward your mortgage (that’s considered double dipping on an investment). But you can use 529 funds to cover your student’s groceries up to the allowed meal amount posted by the college.

For a 12-month apartment lease, remember that the summer months won’t count as a qualified expense if your student isn’t enrolled at least half-time. In this case, make sure you use 529 funds only for rent during the months your student is enrolled.

SECURE Act Expansions and Other Ways to Spend 529 Funds

If you’re spending less because your student is living at home or was awarded a big scholarship, you can use your 529 funds in other ways. Suppose your student earned a scholarship, you may take a penalty-free distribution equal to the amount of the scholarship (you may have to pay income tax for any amount designated for room and board).

Additionally, the 2019 SECURE Act allows families to pay off up to $10,000 of their student’s qualified student loans with 529 money, as well as up to $10,000 of a sibling’s student debt from the same 529 plan without changing beneficiaries.³ That’s one way not to get stuck with leftover 529 money.

529s Are for More Than University Learning

529s can pay for eligible apprenticeship programs (new with the SECURE Act), vocational programs, community college, graduate programs, and up to $10,000 private K-12 tuition in states that consider K-12 private education a qualified expense. Check if yours does.

According to Manpower Group, skilled trades are the most in-demand careers in the U.S. for the seventh consecutive year,⁴ so the expanded flexibility of 529 plans to pay for apprenticeship programs benefits students and employers alike. 

Whether your child is two or 12, it’s never too soon to think about saving for their post-high school plans. Try to keep as many doors open as possible for maximum flexibility. The sooner you start, the better. 

Paying for big ticket expenses like college takes years of planning and saving.

Let us help. Talk to a college savings specialist.

529 Day COVID-19 Survey,, May 2020.

CollegeBacker 529 Day Covid-19 Survey Shows Half of Families Impacted, CollegeBacker, May 2020,

How America Pays for College 2020 survey, Sallie Mae, 

New Law Allows 529 Plans to Repay Student Loans,, Dec. 19, 2019,

The Talent Shortage, Manpower Group, 2020, 

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

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