529 use for Grad School

Our son was recently accepted (and committed to today) to grad school (PhD program in CS).

We are told it is a 5-year, fully-funded program that includes tuition and a monthly stipend.

While we could not be happier, I wonder what we can use our remaining 529 assets for?

Some initial thoughts:

  1. Rent
  2. Computer and/or smart phone
  3. Air transportation to/from school (it is two time zones away)
  4. Car (this would be great!)
  5. If a car is not allowed, can 529 funds be used for day-to-day transportation costs such as bus/subway/uber/lyft?

Any experienced thoughts would be appreciated. A happy day!

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No car or plane travel. You should be able to take out money up to the cost of living in the dorm for rent. Same with meal plan. Should be able to take that out for groceries. Also computer covered.

Transportation costs are not covered at all.

Appreciate the response although the answer is disappointing…smart phone?

No phone. Tuition, fees, books, housing, meal plan, computer.

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Can we use the funds to pay for a better apartment than standard?

If not, I am worried we won’t have much to spend the 529 assets on.

If the stipend is payment for services it would be like doing a job as an undergrad, which doesn’t reduce your ability to pay for room and board using the 529 money, you can use it for incidentals, travel, etc or even save it. Even if not payment for services then if your tuition is already covered, the extra payment would be taxable, so I don’t think there is any obligation to spend it on room and board, you can use the 529 money instead.

The actual room and board you can take from the 529 for an off campus apartment will be the amount given in the cost of attendance figures by the university, like an undergrad but usually based on 12 months instead of 9. Here’s an example from UCLA: Financial Aid and Scholarships - Cost of Attendance

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For housing, you are limited to whatever they charge for dorms for the semesters he is in school. So if dorms are 3k a semester and he is in school 2 semesters you are limited to 6k. If he is in school for 3 semesters (fall, spring, summer) which he will likely be as a grad student then whatever the school will charge for room and board is the limit of your withdrawal.

You can also transfer funds to other children, withdraw with a penalty, or distribute among certain other family members for their college education including grandchildren. We likely won’t take ours out and just save for grandchildren rather than pay the penalty. Grandchildren can also use it for private school tuition (limit on that I think).

This is a good problem to have - saving too much rather saving too little. We will be in the same boat!

For undergrad you can take out the equivalent of the scholarship amount and pay taxes only on the capital gains (no penalties). I’m wondering if this would also apply to fully funded grad programs. They don’t call it a scholarship but it sort of is one.