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Using a 529 plan for an international university?

pandempandem Posts: 1,364Registered User Senior Member
I'm interested in attending a school in Germany. Unfortunately, the school isn't listed on the "accepted school" list for using a 529 plan.

Has anyone had experience with this? There must be some solution. I can't imagine all of that money is now useless because it's an international university.

Also, if it's relevant, the bulk of the costs are for living expenses, not tuition.

Thanks.
Post edited by pandem on

Replies to: Using a 529 plan for an international university?

  • mazewanderermazewanderer Posts: 1,399Registered User Senior Member
    The 529 is a tax deferred plan i.e. you have not paid any taxes on dividend, gains or income that you accrued during the period. The objective is to allow people to save for children's education and if you withdraw the money for qualified educational expenses, the government will not ask you to pay for taxes on the dividends, gains etc.

    Now what you are asking for the taxes to be foregone, even though you are going to a foreign institution. I am sure your institution is good, but you can imagine the amount of tax evasion that can go on if there were no restrictions on the institution that you can spend the money on. If you had paid the taxes, then you can do what you want, if you have legally not paid the taxes, you have to abide by these restrictions.

    So what is your alternative: You can withdraw money from the 529 but you will both pay taxes and a penalty. I think that the penalty is 10%

    Alternatively, you can keep money here assuming you will be coming back for graduate or professional studies. Another way is for your parents to change the beneficiary to a sibling, so that they now use the money for the sibling. Or it can be changed to the name of grandchild. There is no rule that you have to use the money now and your parents can change beneficiaries. This is my understanding, others may want to weigh in.
  • 'rentof2'rentof2 Posts: 4,327Registered User Senior Member
    I believe if has to be on the accepted school list. Whether the money is used for living expenses or tuition isn't relevant, as I understand it.
  • mazewanderermazewanderer Posts: 1,399Registered User Senior Member
    Here are some answers from the IRS. Yes it can be used for living expenses, but I think there are some conditions i.e. needs to a full time student.

    529 Plans: Questions and Answers

    Q. What is the main advantage of a typical 529 plan?

    A. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary, such as tuition, fees, books, as well as room and board. Contributions to a 529 plan, however, are not deductible.

    Q. What is new this year with 529 plans?

    A. A qualified, nontaxable distribution from a 529 plan during 2009 or 2010 now includes the cost of the purchase of any computer technology, related equipment and/or related services such as Internet access. The technology, equipment or services qualify if they are used by the beneficiary of the plan and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution.

    Q. What does “computer technology or equipment” mean?

    A. This means any computer and related peripheral equipment. Related peripheral equipment is defined as any auxiliary machine (whether on-line or off-line) which is designed to be placed under the control of the central processing unit of a computer, such as a printer. This does not include equipment of a kind used primarily for amusement or entertainment. “Computer technology” also includes computer software used for educational purposes.

    Q. Each 529 plan account has one designated beneficiary. What does that mean?

    A. A designated beneficiary is usually the student or future student for whom the plan is intended to provide benefits. The beneficiary is generally not limited to attending schools in the state that sponsors their 529 plan. But to be sure, check with a plan before setting up an account.

    Q. Can I change the beneficiary of a 529 plan I have set up?

    A. Yes. There are no tax consequences if you change the designated beneficiary to another member of the family. Also, any funds distributed from a 529 plan are not taxable if rolled over to another plan for the benefit of the same beneficiary or for the benefit of a member of the beneficiary’s family. So, for example, you can roll funds from the 529 for one of your children into a sibling’s plan without penalty.

    Q. What is an eligible educational institution?

    A. An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.
  • mazewanderermazewanderer Posts: 1,399Registered User Senior Member
    I found out that you can use 529 funds at select foreign institutions. My assumption is that if the institution is not listed, then you are out of luck
  • pandempandem Posts: 1,364Registered User Senior Member
    <i>A. An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.</i>

    I'm hoping that "generally" can be bent a little. I doubt anyone from my state has ever attended this school, so it may not actually be registered in a 529 database. Hopefully.

    Thanks for the FAQ.
  • Erin's DadErin's Dad Posts: 18,493Super Moderator Senior Member
    eligible to participate in a student aid program administered by the U.S. Department of Education
    It doesn't matter that noone from your state has gone there. It is if the school participates in student aid with the US Dept of Ed. That's the entire country.
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