Student Loans to supplement 529

529 is fully funded, but know there will be extra costs and daughter will need spending money.

Do people pay cash for these things? Or would it be a good idea ti have them borrow, preserve some 529, given I have other kids coming along soon to college?

Does it ever make sense to borrow at the 5% rare, let the 529 grow and potentially have that for other kids? Or do most people just pay as much as they can with 529 and borrow at the end?

My thinking is that with multiple other kids, the 529 money will grow over next 5-10 years, and borrowing would preserve some for the other kids, give some skin in tbe game, and give him a defined amount of spending money. Otherwise, my cash is his piggy bank for 4 years….

Congrats on having a fully funded 529.

In the Thumper family, extra costs for discretionary spending and books were paid by our kids who had jobs while in college. This gave them some income to learn to budget (living within one’s means is a life skill) and really money of their own that we didn’t not monitor. It also gave them job experience which they both were able to use for future jobs and LOR from employers. All good things.

I would not take out loans for discretionary spending.


All 5 kids had a 529, but with only enough money to commute to a local college for 4 years. Those who went away took loans, plus worked PT in college and full time over breaks to pay for rent, food, and other expenses. If the 529’s were fully funded they wouldn’t need a loan for expenses, their income would be plenty.

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I agree with @Thumper1 and @Mjkacmom in that your child should be working for his/her discretionary funds. All of our three children had fully funded 529s and my husband would continue to add money to them because their were always issues of tuition increases.

Our kids didn’t “share” their 529s.

There are so many jobs on campus, and each child could work summers at their previous jobs. It did not take long for them to make several thousand dollars, over the summer and work 10 hours a week at their jobs on campus, to cover their discretionary Pizza’s and entertainment dollars.


I agree with the others that students can work part-time during the school year and full time in the summers for spending money. Is the 529 fully funded for kid #1? So, ~$320K? Are there separate 529s for the other kids?

I don’t really understand the idea of the student ‘having skin in the game’…to me that implies the kid trying to get good grades in college and a job after graduation isn’t enough skin in the game. I do know people who have taken out the student loans for spending money, but wouldn’t recommend any loans above the student amount for that. Students can take a total of $27K in loans during the undergrad years ($5.5K first year, then $6.5K/$7.5K/$7.5K), currently that interest rate is 4.99% plus a 1.057% fee. Loans above that amount will be on the parent, either directly or as a co-signer.

The only other advice I have is make it clear to your D what you are and aren’t paying for. For example, if she joins a sorority does the 529 pay for that? Etc. Etc.


To me, the biggest objective (besides getting a rigorous education in whatever field the kid chose) was making sure they all understood that we were “8 semesters and done” financially. You want a break? Get a leave of absence and get a job-- mommy isn’t paying for you to take 2 courses, live with your friends, party all weekend. You need to change majors (all of mine did- multiple times) figure out how to graduate in 8 semesters or figure out your own financing plan for Year 5.

The costs of pizza and a bus pass while the kid is in college is trivial compared with the costs of a 5th year, the costs of supporting a young adult who hasn’t launched, the costs of “I don’t want to work as a computer programmer, I need a BA in social work”.

So focus on the big ticket items- extra semesters of tuition, living costs for 5+ years after college graduation while your kid floats, etc. My kids (now in their 30’s) have friends who believe it or not- are still on the parental dime. And not because they’ve chosen to work as physicians in a rural area and are still paying off med school loans (I’d consider helping with that if I could) but because they are living in the nice apartments with a doorman in expensive cities and partying with their friends who have high paying professional jobs- and they are “finding themselves” while working as social media influencers making $20K per year.

You want to “find yourself”? Your childhood bedroom is empty, and you are in charge of making dinner Mondays and Thursdays. Pasta is fine as long as you clean up afterwards. I’m not paying rent for a 35 year old in Washington DC or Boston!


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.


Even at 5%, that student loan balance can grow pretty quickly and that is a high price to pay for pizza.

If your child needs to loans to pay for tuition and living expenses, well, that’s what student loans are for. My kids both had to take them just to get through college. One had good scholarships and took the (subsidized only) loans, used them as needed, but still lived as cheaply as possible. She ended up with some money in the bank (not making money on it as interest rates were less than 1% at the time) so had some to get started on her life when she graduated. She was self supporting while still in college.

The other was (and is, even in grad school) the very very poor college student. Even pizza on a Saturday night had to be a planned expense. Her loan balance grew while in college as she had unsubsidized loans too. It’s rough, especially seeing how fast those loan balances grow.

I wouldn’t borrow to ‘have skin in the game.’ Kids have that anyway or shouldn’t be in college. I wouldn’t borrow to save 529s and have those accounts grow (really, it’s hard to play the market) but nothing wrong with limiting this first kid to $X and saying that’s his share and he needs to fund the rest by 1) picking an affordable school, 2) getting scholarships and 3) workings during school, and maybe taking loans if he still needs the money for TUITION, but not for spring break and beer money. Families do have to share the burden.

Slight side note: This passed as part of the Secure Act 2.0. If one has funds left in a 529, it is worth the time to do a quick Google for the details, as there are some specific details to understand.

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Thanks all.

Thinking was that she would borrow the $27,000 over 4 years subsidized, since it accumulates no interest while in school. It could sit in an account and earn interest(Many savings are giving 3% right now), if the money is needed, we use it, otherwise pay it off at the end with the same money, and have some interest. If we spend $10,000 of it , that can be paid off with 529 funds. The other $17,000 would be at risk, that I could pay off with income just like I would have had to pay in the first place, or have her put it on a 30 year plan with minimal payment, ability to payoff at any time, the 5% interest would be a tax deduction, and the way things are going it may even get forgiven. Just a low risk security blanket. IF she doesn’t take it when she can, she never will be able to take it. Its a one time opportunity for piece of mind at low risk…

Subsidized student loans are based on financial need and even then if you take the max some will be unsubsidized. We aren’t eligible for FA except when we have 3 in college at the same time some are subsidized.

Please check out this website to gain some understanding of subsidized and un-subsidized loan amounts are determined:

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Seconding that you read the fine print in the link above. All your D’s loans won’t be subsidized, it could be even be none are if there is no financial need. Interest on the unsubsidized portion of the loans starts accruing immediately. Strongly encourage families to pay the interest charges real time all thru college.

OP, when I was in grad school everyone borrowed the max subsidized loans, invested the money (interest rates were in the teens at that point) which was a no brainier. As you can imagine, that didn’t last long. There is no reason the taxpayers should be subsidizing free investment cash for people who can afford tuition.

I would not count on changes to the loan repayment program applying to everyone. There are enough people who remember the abuses…high income families investing loan funds for a zero risk investment. If the changes go through they will likely apply to Pell recipients, graduates in public service roles, or some income cap.

$27000 is the total direct loan amount. Only a portion is subsidized. For freshman year, $3500 is subsidized and the remaining $2000 is not. PLUS as noted, subsidized loans are only available to those who have financial need at that college. If you have a fully funded 529, it’s very possible your child has no financial need.

And for FAFSA purposes, that bonus for having multiple kids in college goes away for the 2024-2025 academic year.

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And NOW all grad federally funded loans are unsubsidized.

I say Huzzah. I needed my loans to pay tuition-- every penny of them. It was kind of vile to hear the bragging of who made the better arbitrage call with money which was backstopped by the federal government (i.e. you and me) with no self awareness that your “free loan” wasn’t actually free!


In my opinion, grad loans to pay tuition are very different than what this OP is asking about. This parent has a “fully funded 529”. They are wondering about loans for spending money. Sorry…but in my opinion, that is what a job is for. No need to amass debt (and interest) when avoidable…and this is.

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Read about the AOTC, and consider if you should be paying cash (or borrowing funds to pay) up to the amounts required to get the AOTC credit if you’ll qualify.

“The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student.”


Pay attention to the “No Double Benefit Allowed” section of publication 970.

Notice that “qualified education expenses” are defined differently for 529s and AOTC.