We tried (successfully) to completely avoid loans. What we could afford through income plus 529 funds was the budget. A few universities (BU, NEU) just did not fit the budget.
There are indeed some things that you are not permitted to fund out of a 529 plan. My understanding is that travel to and from the university is one example. We assumed going out for movie and a pizza on a Saturday evening was another. We just paid cash for these, or our daughters funded it.
Both daughters did work a bit as undergraduate students. One worked in a veterinary clinic and also in a restaurant. Since she was thinking about being pre-vet and going on to a DVM, the first part of this was quite appropriate (and even the second part involves contact with the public, which is relevant to a DVM candidate). The other the first summer got a summer job near home and banked her income. Then she got a TA position at university. Then she got a paid research position in university (lab work). You will want to limit how much a student works when they are also a full time university student. Keeping up with class work is more important.
We had the inverse problem that our younger daughter ended up with a good merit scholarship and some other funding (TA, research) so she never used up her 529. Her older sister has solved this problem by going back for the DVM (which is in progress).
First jobs after graduation often do not pay very well. One daughter in particular was offered a very, very interesting job that was very relevant to her desire to get a DVM but that paid very badly and was a long way from home. She could only take this because she had no debt. This led to a second job, and also allowed her to establish residency in a state that allowed her to get in-state pricing for the DVM, all of which helped her and us a great deal.
No debt meant that both daughters became self-supporting within a few weeks of starting their first job after graduation. This is helpful to the parents, but is also an important milestone for the kids. Of course the DVM has undone this for one daughter, but as soon as we get to call her “Doctor Twogirls” she will be self supporting again.
I do understand that it is not fully possible to predict how 529 funds will grow over time (they probably are not doing so well right now) and to predict how expensive university will be for future students. We just did our best. The 529 funds will run out soon and the last few semesters of a graduate program will just need to be funded some other way. I like the fact that congress was recently considering allowing people to do something else with left over 529 funds, although I am not sure what happened with this proposal.
I might add that the “skin in the game” expected of the kids were for them to choose a university that is affordable and a good school, and to get good grades. Both needed to work very hard to do well in their classes. We did not see any value in sticking either of them with any debt.