Using a 529 Account to Pay for an Online Education

sarahheller By sarahheller, 16th Jul 2011 | Follow this author | RSS Feed | Short URL http://nut.bz/1y5euyez/
Posted in Wikinut>Money>Investing

Getting a degree online is a great way to attend school and advance your career while you’re still working. Since online education is relatively new, however, there are a lot of questions about how to pay for it. While online schools are typically much less expensive than a traditional “brick and mortar” school, students will still need to pay for their education. In addition to applying for government aid, many students want to use their 529 accounts.

Using a 529

A 529 account is a specific type of savings account designated for college expenses. By law, money put into these accounts grows tax-free, but the funds can only be used for certain types of expenses. First, the funds must be spent at an accredited university, college, or vocational training program. This is the same type of accreditation needed to apply for federal financial aid. In general, if a student can qualify to receive loans and grants for their education at an online school, that student should also be able to use their 529 account there.
Next, students pursuing an online education should realize that their 529 funds can only be used to pay for certain things. According to the rules set by the federal government on these accounts, 529 funds can pay for tuition, room and board, books, and fees at accredited institutions. This means that 529 funds can pay for course fees and tuition, internet fees, textbooks, and other equipment necessary to complete coursework. A student does have to show that this equipment is necessary. Buying a computer in order to access classes and complete classwork is usually considered a necessary expense, but purchasing a high end model or several computers in one year might be questioned. Basic school supplies and materials necessary for vocational training (such as blood pressure monitors for a nursing certificate) are also permitted.
Using 529 funds for incidental expenses is not permitted, however. Using the funds to buy a car, pay rent, or even paying utility bills are not allowed for online students at this time. While 529 funds can be used to pay for room and board, this is only allowed at institutions that offer on-campus housing. Students pursuing an online education are not allowed to use 529 funds towards these expenses since they are not part of the school. As a solution to this problem, many students use their 529 money to pay for tuition, then take their grant and student loan money to help pay for these expenses. Since online schools are very familiar with these financial aid rules, most are very willing to issue a check for any overage in grant or loan money in order to help students with these incidental expenses until they are finished with their degree.

Tags

529 Account, College Savings, Online Education

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author avatar Funom Makama
18th Oct 2011 (#)

Insightful, deep, nice and just what we need to read in such a community. My sense of values sometimes comes from such articles. Keep it up!

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