529 plan question

[wheels]

We have a 529 plan set up for our daughter's college. She is a junior this year and is considering summer programs at different colleges. Can we use her 529 funds to pay for tuition to these programs?

Thanks!

[kathiep]

wheels, if you look at this site: http://money.howstuffworks.com/5297.htm it says, " Your child can go to any accredited degree-granting educational institution, whether it is public, private, two-year, or four-year. There are even some international schools that qualify." For the real, true answer you should probably read the fine print on the plan documents. I'm sure you can also google 529, your state and find the info there.

[backhandgrip]

Just to add, the Education IRA is now callled the Coverdell Saving fund and you can put up to $2000 into it annually for child's or in our case, grandchild's education. The money must come out by age 30 and if it is used for college/education it is interest free.Some banks don't know about the changes to the Education IRA so go on the site and inform the bank if they do offer Education IRA's and you have an interest.

[backhandgrip]

Tax free, not interest free. Where's my head.

[mootmom]

One of the Fidelity sites I read says this about using funds in a 529 plan:

Distributions from the 529 Plans can be taken at any time for any reason; however, if the funds are not used for qualified higher education expenses, any earnings would be subject to federal income taxes at the Distributee's rate and a 10% federal penalty tax.

I recall our financial advisor telling us the money could only be used for college ("higher education") expenses without penalty, so I suspect using it for your D's HS summer program would incur tax consequences. (And a 10% penalty might eat up a good chunk of the interest.) You might check with a financial planner or the details of your particular plan to be sure.

[swimcatsmom]

A different question about 529s - if there is money left in 529 after undergrad (might happen if more scholarships come through - we can always hope and dream ) is graduate or med school a qualified education expense?

[JHS]

Yes. Grad education is fine. But a summer program for high schoolers at a college won't work. The student has to be enrolled in a program leading to a higher-education degree or other equivalent credential.

[OpiefromMayberry]

Also remember the investments are boxes to be filled with different investments that should be based on your risk tolerances. Banks aren't the only place and CD's aren't the only choice.

Think of IRAs, Coverdales and so on as shoeboxes. You can put just about anything inside of them. There are very few restrictions on choices. It should come down to what your risk tolerances do to influence your investment selections. In other words, what allows you to sleep at night?

[backhandgrip]

...........................risk................... ....scary......scary........................

[NJres]

That is a really good question. I think you have to find out exactly what is the definition of "qualified higher education expenses." I know there are summer programs for hs students that let the kids take courses that earn college credit. JHS may be right, but I need a bit more convincing. I would ask the schools that run the programs.

[OpiefromMayberry]

...........................risk................... ....scary......scary........................

Remember there are several kinds of risk, not just investment risk. That was my point, do what you can stomach and don't worry about the Jone's and what they do. People keep investments they are comfortable with, while people that are uncomfortable tend to move investments waaay too often creating "drag" or transaction friction.

[mootmom]

I wouldn't ask the schools who run the summer programs, I'd ask a financial advisor or call the company that sponsors the 529. They're the ones who will know what can and can't be done with the money without penalty.

I know when I made a withdrawal from a 529 for my older S's tuition last year, the check was made out to the school and I had to provide his registration info before the check was sent. I suspect the 529 firm will be familiar with the institutions people ask to pay from their accounts and can offer a reading.

And I think the only question might be whether the summer course can be counted for college credits -- if not, if it's just a "summer on campus" academic program, I'm guessing the answer is no.