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• Using 529 Savings to Study Abroad

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Using Your 529 Savings to Study Abroad

Many foreign schools and most educational expenses qualify

As the cost of attending college increases across the United States and around the globe, how to pay for it remains a big concern. Many students and families who opened 529 plan accounts to fund their education here are discovering that the money can also be used to study abroad, if you follow the rules.

Key Takeaways

• 529 savings plans can be used to pay for study-abroad programs but not to cover day-to-day expenses or travel costs, which can be substantial.
• The host school must be approved by the U.S. Department of Education to be eligible for 529 funds.
• The student must also be enrolled at least half-time for their room and board costs to qualify.

A 529 plan is a tax-advantaged savings account for education. While traditionally used for college and other higher education costs, the plans can now be used for qualified K–12 expenses and some student loans as well.

529 plans are administered by the states. While different states offer different funds—as well as varying tax deductions or credits—you don’t necessarily have to buy into a plan offered by the state where you reside. The majority of 529 savings plans have no state residency requirements, leaving you free to choose from a vast number of plans—although you may forgo a state tax break for your contributions if you do.

While your contributions don’t entitle you to any immediate federal tax breaks, the money that your account earns will not be subject to federal income tax as long as you use your withdrawals for qualified education expenses , such as tuition, room and board, and mandatory fees.

How to Use 529 Savings to Study Abroad

Before putting down a deposit on an expensive study-abroad program, you may want to familiarize yourself with the rules regarding 529 plans and educational trips. Fortunately, the bulk of study-abroad expenses consists of tuition, fees, and room and board, which are eligible to be funded with 529 money just as they are in the United States. Required textbooks—which can be another significant expenditure—are also covered.

Note that for room and board to qualify, the 529 beneficiary must be at least a half-time student. And if the student chooses to live off campus, then their eligible room and board can’t exceed the school’s published cost of attendance estimate for those expenses.

A study-abroad program sponsored by your U.S. college or university will qualify for 529 funding if the U.S. school does. If you enroll in a foreign college or university, it may also qualify if it’s an eligible educational institution as defined by the U.S. Department of Education. You can find out by consulting the Federal School Code List . Many foreign colleges and universities are on the list.

In addition, as a result of the Setting Every Community Up for Retirement Enhancement (SECURE) Act , passed and signed into law in 2019, 529 funds can now be used to pay back student loans (up to $10,000) and for eligible apprenticeships—both of which could be useful for those studying abroad.

You can’t use 529 funds for travel, so you’ll want to budget accordingly for tickets to get to your destination and home again.

Unfortunately, there are study-abroad costs that are not covered because they are not considered qualified expenses by the Internal Revenue Service (IRS) . These include:

• The cost of traveling to and from the school, including airline tickets, train tickets, cab fares, etc.
• International health insurance or medical costs not covered by U.S. health insurance (You can’t use your 529 to pay for U.S. health insurance, either.)
• Basic living expenses, which may be cheaper or more expensive than in the United States
• Any costs associated with an international cellphone
• Sports or other activities that are not part of the college curriculum

Are Study-Abroad Programs Eligible for Federal Financial Aid?

Yes, you can use federal financial aid for study-abroad programs, as long as you qualify for aid in the first place. The rules differ depending on whether you’re an undergraduate or graduate student and whether you’re taking a study-abroad program for credits at your U.S. college or university or enrolling full-time in the foreign school. You can find more details on the Federal Student Aid website.

What Happens If I Use 529 Funds for Expenses That Don’t Qualify?

If you withdraw money from a 529 plan account and use it for something other than qualified education expenses, you’ll generally owe federal income tax on the earnings (as opposed to contributions) portion of that amount as well as an additional 10% penalty. Your state may impose taxes and penalties as well.

Can I Use My 529 to Live Off Campus If I Study Abroad?

Yes, as long as you are enrolled at least half-time. However, the cost of your living expenses may not exceed that of the published room and board at the school you are attending. If there is a gap in the price, you’ll have to cover that using other funding.

The fantasy of studying abroad is often accompanied by sticker shock, as tuition and housing costs for these programs continue to rise. Fortunately, by using a 529 account—if you have one—you can save money on all of the expenses that qualify.

Internal Revenue Service. “ IRS Offers Guidance on Recent 529 Education Savings Plan Changes .”

Saving for College. “ How Much Is Your State’s 529 Tax Deduction Really Worth? ”

Internal Revenue Service. “ Topic No. 313, Qualified Tuition Programs (QTPs) .”

Internal Revenue Service. “ Publication 970: Tax Benefits for Education ,” Pages 50–52.

U.S. Securities and Exchange Commission. “ Updated Investor Bulletin: An Introduction to 529 Plans .”

Federal Student Aid. “ Aid for International Study .”

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How To Use 529 Funds To Pay for Studying Abroad

Using a 529 Plan To Pay for the Cost of Studying Abroad

Should you use 529 plan money to pay the cost of studying abroad, how to save on the cost of studying abroad, frequently asked questions (faqs).

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Studying abroad in college can be an eye-opening experience, but there's just one potential obstacle: the price tag.

On average, the cost of studying abroad ranges between $7,000 and $15,000 per academic semester. While student loans, study abroad scholarships, and grants may cover some of that, there is another option. If you've contributed money to a 529 college savings plan for college expenses, those funds can be used to pay study abroad expenses, too.

Key Takeaways

• You can use 529 college savings plan funds to pay for qualified education expenses such as tuition, room and board, and textbooks.
• Travel-abroad expenses such as airfare or international health insurance would not be qualified education expenses and could not be paid for with 529 funds.
• Before you commit 529 funds, make sure the host school abroad is eligible to participate in the Department of Education's student financial aid system.

529 plans are designed to offer a tax-advantaged way to save for qualified higher education expenses at eligible colleges and universities. The types of expenses typically covered include:

• Tuition and fees
• Room and board
• Computer software and equipment

The same rules that apply when using 529 funds to pay for college in the U.S. carry over when using the money to cover the cost of studying abroad. Simply, for a 529 plan withdrawal to be considered qualified and thus, tax-free, the money must be used to pay qualified study abroad expenses at a college or university that's eligible to participate in federal student aid programs.

The Department of Education maintains a list of international schools (including medical schools) that participate in federal student aid programs. If you plan to use student loans to pay some of the cost of studying abroad, they'll just need to fill out the Free Application for Federal Student Aid (FAFSA) as usual.

Costs Your 529 Plan Will and Won't Cover

So what expenses can be covered? The same list of things that would be covered at your home school mentioned earlier. The more important consideration is what you cannot use 529 account money for when paying the cost of studying abroad. That list includes:

• Travel to and from the host country or school
• International health insurance or health care costs incurred overseas
• An international cell phone
• Living expenses beyond room and board as provided by the host school
• Fees for activities and sports that aren't part of your curriculum

One other thing to note: Students must be enrolled at least half-time for a 529 plan withdrawal to count as a tax-free distribution. If you drop a course and fall below half-time, that could trigger a tax penalty.

This is an important question and finding the answer starts with analyzing the cost of studying abroad. The cost largely hinges on three things:

• The location of the host school
• The length of your stay
• Who's sponsoring the program

If you are enrolling in a study abroad program through your home university, you'll effectively pay the same for tuition, fees, and room and board at the host school as you would at home. If you're enrolling through the host school, however, the school determines the cost of attendance. Study abroad programs can also be sponsored by third-party companies, which charge their own fees.

If your home school comes with a significant tuition bill, and the host school is offering a much lower rate, it might make sense to reserve 529 plan money for expenses at your home school and pay for study abroad another way.

There's something else to consider if you are going through a third-party provider. You'll have to be sure the host school is qualified to participate in federal student aid programs. If it's not, you may not be able to use 529 plans as a tax-free withdrawal since third-party study abroad providers themselves don't have a federal school code. If you're paying for a third-party program with 529 money, be sure to keep detailed records of the expenses you pay in case the IRS challenges your withdrawal as non-qualified.

Before you set off, take time to create a budget and do the math to see if there are any opportunities to save on study abroad expenses.

For example, room and board on campus may be an option but how does that compare to the cost of living off campus? In some cities, and depending on the school, it may actually be less expensive to rent a private apartment.

Travel costs are another consideration. As soon as you know you plan to study abroad, start researching flights to their host destination. Booking early could help you snag a deal on an inexpensive flight.

If you have a travel rewards credit card , check your rewards balance to see if you have miles or points accumulated that you could use to cover the cost of their flight. One strategy that may be worth looking into if you don't have a travel rewards card is opening one well in advance of the travel date, then charging things to the card to earn an introductory points or miles bonus. You could then apply those rewards to their airfare. Just remember to pay the balance in full, otherwise, interest charges could nibble away at your savings.

Can a 529 plan be used for study abroad?

Yes, funds from a 529 college savings plan account may be used to pay for a study-abroad program. Just be sure the program is approved by the Department of Education and that you use withdrawn funds to cover qualified education expenses (which don't include travel expenses).

What Happens If I Use 529 Funds for Expenses That Don’t Qualify?

If you withdraw 529 college savings accounts funds and use them for non-qualified education expenses, you will be liable for income tax on that amount, plus a 10% penalty. You may also be subject to taxes and penalties levied by the state in which the account is held.

University of Louisville Office of Study Abroad and International Travel. " Financing your Study Abroad Program ."

Securities and Exchange Commission. " An Introduction to 529 Plans ."

Internal Revenue Service. " Topic No. 313 Qualified Tuition Programs (QTPs) ."

Internal Revenue Service. " Publication 970, Tax Benefits for Education ."

Can I use a 529 plan to study abroad?

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Studying abroad is valuable for many reasons, but it almost always costs more than a semester at your home school. If your child is heading abroad for higher education, you might be looking for ways to cover the cost. One way to foot the bill is to use a 529 plan . A 529 plan is an account that allows you to save after-tax money for education expenses. You can withdraw the funds tax-free as long as they’re used for qualified education expenses at universities, technical schools and vocational programs.

These tax-advantaged investment accounts allow you to stash away money for qualified education expenses, including tuition at eligible international schools. Here’s what to know about using these accounts for studying abroad .

Can a 529 plan be used for study abroad?

Distributions from a 529 plan can be used to pay for qualified higher education expenses at eligible international schools or universities. But to avoid taxes and penalties, it’s important to be sure that the school and the withdrawals meet IRS rules. Here are a few factors to consider.

Are the expenses qualified?

You’ll need to use the money from a 529 plan on qualified higher education expenses. This restriction applies to both U.S. schools and international schools. Additionally, students must use the plan withdrawals in the same calendar year that the qualified expenses are paid.

How long is the student’s stay?

Students must be enrolled in school at least half time for a 529 plan withdrawal to count as a tax-free distribution. The beneficiary may enroll at an international school for their entire educational program, or they can choose to spend a semester or two abroad.

Is the international school eligible?

To use 529 funds for an international school, the institution must be eligible for Title IV federal student aid. You can find out which schools qualify by checking the Department of Education’s list of participating schools . There are 760 international schools that are currently eligible for federal student aid.

If you can’t find a particular institution on the list, contact the school’s administrative office and ask whether students can apply for federal financial aid in the U.S. If the answer is “yes,” ask for the school’s code.

What college expenses are covered by a 529 plan when you study abroad?

A 529 plan allows you to save money for “qualified” education expenses. Generally, those include the normal costs of attending an educational institution, such as:

• Tuition and fees.
• Books, textbooks, supplies and equipment.
• Room and board (if enrolled at least half time).

But a 529 plan won’t cover certain expenses, including:

• International health insurance.
• Travel expenses.
• Basic living expenses.
• Sports and activity fees.

If you use 529 funds to pay for these nonqualified expenses, the IRS will apply income tax to the withdrawals, as well as a 10 percent penalty on the earnings portion of the withdrawal.

Should I use my 529 to study abroad?

A 529 plan can be a great way to cover the cost of school overseas. To figure out if this is a good fit for your family, first make sure that your child wants to attend an eligible school and that you plan to use the funds for qualified purposes.

Next, you can compare program costs. If your child enrolls in a study abroad program for one or two semesters, they’ll pay tuition and fees to their home university. But if they’re earning a degree through the host school, the school determines the cost of attendance. It might make sense to reserve 529 funds for expenses at the child’s home school if the international school offers a much lower cost.

If the study abroad program is offered through a third-party service, keep detailed records of the expenses you pay. That way, you’ll be prepared if the IRS audits your tax return and tries to challenge whether the expenses are eligible for tax-free withdrawals.

Reasons why you might not want to use your 529 for study abroad

While using a 529 plan can help fit the bill for study abroad, you may decide it is better not to use the funds for this purpose. For one, 529 funds may be subject to taxes in other countries because the money is only recognized under U.S. tax code.

Additionally, if you are applying for a study abroad program through a U.S.-based school, you will pay the tuition of that school rather than the school you are attending. If the school where the study abroad program is being taught is cheaper to attend, it may make more sense to pay for the program another way rather than using the 529 plan through the domestic school.

Other ways to pay for study abroad

While a 529 plan can be a great way to cover your study abroad expenses, it may not be enough, or the school you’re attending may not be eligible. Here are some other potential ways you can get the funds you need to pay for your experience:

• Apply for scholarships: The U.S. Department of State provides a list of scholarships available for students studying abroad in different countries. These scholarships are typically provided by foreign governments. You can also use scholarship search engines to seek out financial aid from private organizations.
• Manage your expenses: Unless your study abroad plans are already set in stone, consider going to a country with a lower cost of living. For example, South America and Eastern Europe may be cheaper options than Western Europe. Compare program costs between universities and try to find the right fit for your budget.
• Get a job: Depending on which country you’re planning to study in, you may have opportunities to work while you complete your coursework. Research visa requirements beforehand to understand what your options will be. You can also take a break between semesters and work at home before you travel.
• Apply for student loans: Some foreign universities are eligible for federal financial aid, including student loans . There are also private lenders that offer student loans specifically for studying abroad. Federal loans are typically more beneficial in the long run, so focus on those first, then consider private student loans as a last resort.

Take your time to map out your plans for studying abroad and how you’ll cover the expenses. The sooner you start with this process, the easier it will be to enjoy your study abroad experience without worrying about the financial side of things.

The bottom line

529 plans are one financial tool that you can use to pay for study abroad programs and can be a useful way to cover the expenses of education overseas. Consider all costs including taxes when factoring your decision and determine if using a 529 plan to pay for your education makes sense for you.

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Using 529-Plan Money for College Overseas

If your son or daughter plans to attend college abroad, here's what you should know.

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Question: My daughter may go to college in Europe next year. Can we use her 529 college-savings money tax-free outside of the U.S.? - S.S., Lubbock, Texas

Answer: Yes. You can use 529 money tax-free at any college that is elig­ible for federal financial aid, which includes more than 400 foreign institutions, says Mark Kantrowitz, of Savingforcollege.com . To look up eligible schools, go to www.savingforcollege.com/eligible_institutions .

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As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.

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Can 529 college savings plan fund be used to study abroad?

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Dear Liz: Can my daughter use her 529 funds for summer study abroad in Costa Rica? She will be taking two Spanish classes for credit through her university. She has a minor in Spanish. Could she use the 529 for tuition, living expenses and airfare? What if it is all part of a package deal paid to her university?

Answer: Yes, tax-free withdrawals from 529 college savings plans are allowed for study abroad as long as the classes are accepted for credit by the sponsoring university and the sponsoring university qualifies for federal financial aid (the vast majority of U.S. institutions do).

Qualifying expenses can include tuition, books and supplies, plus room and board if she’s enrolled at least half time. Other living expenses and transportation costs, including airfare, aren’t considered qualifying expenses.

Update trusts after life changes

Dear Liz: My wife and I have a trust created in California to distribute our assets to our children after our deaths. In 2017, we moved to Texas and had the trust updated by a Texas attorney to reflect some changes and any differences between Texas and California rules. We moved back to California in 2020. Do we need to update our trust documents again because of the relocation? Do we need to do it any time we move? The terms in the document are generally fine. I just don’t know if the change in residency requires an update to the document.

Answer: Your last move required updates. Why wouldn’t this one?

Any major life change, including a move to another state, should prompt a review of your estate documents. Such a review is a good idea anyway every five years or so, even if you think nothing has changed in your personal circumstances. Laws can change, or you may have different ideas about who your beneficiaries should be, or whom you want to make decisions for you should you become incapacitated.

People often think (or hope) estate planning can be a one-time process. But life and the law aren’t static, so estate plans need to evolve too.

How capital gains boost Medicare premiums

Dear Liz: We are retired and living mainly on a pension, which covers our month-to-month needs. We own our house outright and are considering downsizing. When we do that, will the capital gain cause our Medicare premiums to go up two years later? If so, will it automatically go down again after one year?

Answer: A big-enough capital gain can trigger Medicare’s income-related adjustment amount, which are surcharges on your Part B and Part D premiums. As you note, there’s a two-year delay between the higher income on your tax returns and higher premiums.

If you’ve had a life-changing event — marriage, divorce, a spouse’s death or loss of income, for example — you can appeal the increase by filing form SSA-44 . Otherwise, consider saving some of the home sale profits to cover your higher premiums for that one-year period.

Property transfers trigger tax problem

Dear Liz: I’m considering giving property (a condo) to my child through a quitclaim deed while I am still living. If she continues to live in the condo for two years after gaining possession, doesn’t she get a $250,000 capital gains exemption when she sells the property?

Answer: Yes, if she owns and lives in the home for at least two of the previous five years, she can exclude up to $250,000 of home sale profits from her income. However, her taxable gain would be based on your tax basis in the property: basically what you paid for the home, plus any qualifying improvements. Only if she inherits the home would the tax basis be updated to reflect its fair market value on the date of your death. Although taxes should never be the sole consideration for property transfers, the favorable step-up in basis may be a powerful incentive to hold off. Consider discussing your options with a tax pro.

Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

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Liz Weston, Certified Financial Planner, is a personal finance columnist for the Los Angeles Times and NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.

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Can i use a 529 plan to study abroad.

Studying abroad is valuable for many reasons, but it almost always costs more than a semester at your home school. If your child is heading abroad for higher education, you might be looking for ways to cover the cost. One way to foot the bill is to use a 529 plan . A 529 plan is an account that allows you to save after-tax money for education expenses. You can withdraw the funds tax-free as long as they’re used for qualified education expenses at universities, technical schools and vocational programs.

These tax-advantaged investment accounts allow you to stash away money for qualified education expenses, including tuition at eligible international schools. Here’s what to know about using these accounts for studying abroad .

Can a 529 plan be used for study abroad?

Distributions from a 529 plan can be used to pay for qualified higher education expenses at eligible international schools or universities. But to avoid taxes and penalties, it’s important to be sure that the school and the withdrawals meet IRS rules. Here are a few factors to consider.

Are the expenses qualified?

You’ll need to use the money from a 529 plan on qualified higher education expenses. This restriction applies to both U.S. schools and international schools. Additionally, students must use the plan withdrawals in the same calendar year that the qualified expenses are paid.

How long is the student’s stay?

Students must be enrolled in school at least half time for a 529 plan withdrawal to count as a tax-free distribution. The beneficiary may enroll at an international school for their entire educational program, or they can choose to spend a semester or two abroad.

Is the international school eligible?

To use 529 funds for an international school, the institution must be eligible for Title IV federal student aid. You can find out which schools qualify by checking the Department of Education’s list of participating schools . There are 760 international schools that are currently eligible for federal student aid.

If you can’t find a particular institution on the list, contact the school’s administrative office and ask whether students can apply for federal financial aid in the U.S. If the answer is “yes,” ask for the school’s code.

What college expenses are covered by a 529 plan when you study abroad?

A 529 plan allows you to save money for “qualified” education expenses. Generally, those include the normal costs of attending an educational institution, such as:

Tuition and fees.

Books, textbooks, supplies and equipment.

Room and board (if enrolled at least half time).

But a 529 plan won’t cover certain expenses, including:

International health insurance.

Travel expenses.

Basic living expenses.

Sports and activity fees.

If you use 529 funds to pay for these nonqualified expenses, the IRS will apply income tax to the withdrawals, as well as a 10 percent penalty on the earnings portion of the withdrawal.

Should I use my 529 to study abroad?

A 529 plan can be a great way to cover the cost of school overseas. To figure out if this is a good fit for your family, first make sure that your child wants to attend an eligible school and that you plan to use the funds for qualified purposes.

Next, you can compare program costs. If your child enrolls in a study abroad program for one or two semesters, they’ll pay tuition and fees to their home university. But if they’re earning a degree through the host school, the school determines the cost of attendance. It might make sense to reserve 529 funds for expenses at the child’s home school if the international school offers a much lower cost.

If the study abroad program is offered through a third-party service, keep detailed records of the expenses you pay. That way, you’ll be prepared if the IRS audits your tax return and tries to challenge whether the expenses are eligible for tax-free withdrawals.

Reasons why you might not want to use your 529 for study abroad

While using a 529 plan can help fit the bill for study abroad, you may decide it is better not to use the funds for this purpose. For one, 529 funds may be subject to taxes in other countries because the money is only recognized under U.S. tax code.

Additionally, if you are applying for a study abroad program through a U.S.-based school, you will pay the tuition of that school rather than the school you are attending. If the school where the study abroad program is being taught is cheaper to attend, it may make more sense to pay for the program another way rather than using the 529 plan through the domestic school.

Other ways to pay for study abroad

While a 529 plan can be a great way to cover your study abroad expenses, it may not be enough, or the school you’re attending may not be eligible. Here are some other potential ways you can get the funds you need to pay for your experience:

Apply for scholarships: The U.S. Department of State provides a list of scholarships available for students studying abroad in different countries. These scholarships are typically provided by foreign governments. You can also use scholarship search engines to seek out financial aid from private organizations.

Manage your expenses: Unless your study abroad plans are already set in stone, consider going to a country with a lower cost of living. For example, South America and Eastern Europe may be cheaper options than Western Europe. Compare program costs between universities and try to find the right fit for your budget.

Get a job: Depending on which country you’re planning to study in, you may have opportunities to work while you complete your coursework. Research visa requirements beforehand to understand what your options will be. You can also take a break between semesters and work at home before you travel.

Apply for student loans: Some foreign universities are eligible for federal financial aid, including student loans . There are also private lenders that offer student loans specifically for studying abroad. Federal loans are typically more beneficial in the long run, so focus on those first, then consider private student loans as a last resort.

Take your time to map out your plans for studying abroad and how you’ll cover the expenses. The sooner you start with this process, the easier it will be to enjoy your study abroad experience without worrying about the financial side of things.

The bottom line

529 plans are one financial tool that you can use to pay for study abroad programs and can be a useful way to cover the expenses of education overseas. Consider all costs including taxes when factoring your decision and determine if using a 529 plan to pay for your education makes sense for you.

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Using 529 Plans to Study Abroad

Many students who use 529 plans (college savings accounts) to fund their education at KU can also use their 529 plan for study abroad. Study abroad expenses such as tuition and fees, program fees, room and board, and required textbooks are eligible to be funded with a 529 plan, just like they are in the United States.

Study abroad expenses that are not able to be covered with 529 plans include transportation, international health insurance, medical costs not covered by U.S. health insurance, basic living expenses, and any costs associated with an international cell phone.

KU study abroad program budgets will detail which payments, if any, are made through KU Enroll & Pay. Using 529 plans to pay for study abroad expenses follow the same process as paying for on-campus courses. Depending on the program, some fees will be paid directly to the host institution or program provider and not billed through KU, so you will have to check with your specific 529 plan to see what the procedure will be to pay for those fees. 

Can I use a 529 plan to study abroad?

S tudying abroad is valuable for many reasons, but it almost always costs more than a semester at your home school. If your child is heading abroad for higher education, you might be looking for ways to cover the cost. One way to foot the bill is to use a 529 plan . A 529 plan is an account that allows you to save after-tax money for education expenses. You can withdraw the funds tax-free as long as they’re used for qualified education expenses at universities, technical schools and vocational programs.

These tax-advantaged investment accounts allow you to stash away money for qualified education expenses, including tuition at eligible international schools. Here’s what to know about using these accounts for studying abroad .

Can a 529 plan be used for study abroad?

Distributions from a 529 plan can be used to pay for qualified higher education expenses at eligible international schools or universities. But to avoid taxes and penalties, it’s important to be sure that the school and the withdrawals meet IRS rules. Here are a few factors to consider.

Are the expenses qualified?

You’ll need to use the money from a 529 plan on qualified higher education expenses. This restriction applies to both U.S. schools and international schools. Additionally, students must use the plan withdrawals in the same calendar year that the qualified expenses are paid.

How long is the student’s stay?

Students must be enrolled in school at least half time for a 529 plan withdrawal to count as a tax-free distribution. The beneficiary may enroll at an international school for their entire educational program, or they can choose to spend a semester or two abroad.

Is the international school eligible?

To use 529 funds for an international school, the institution must be eligible for Title IV federal student aid. You can find out which schools qualify by checking the Department of Education’s list of participating schools . There are 760 international schools that are currently eligible for federal student aid.

If you can’t find a particular institution on the list, contact the school’s administrative office and ask whether students can apply for federal financial aid in the U.S. If the answer is “yes,” ask for the school’s code.

What college expenses are covered by a 529 plan when you study abroad?

A 529 plan allows you to save money for “qualified” education expenses. Generally, those include the normal costs of attending an educational institution, such as:

• Tuition and fees.
• Books, textbooks, supplies and equipment.
• Room and board (if enrolled at least half time).

But a 529 plan won’t cover certain expenses, including:

• International health insurance.
• Travel expenses.
• Basic living expenses.
• Sports and activity fees.

If you use 529 funds to pay for these nonqualified expenses, the IRS will apply income tax to the withdrawals, as well as a 10 percent penalty on the earnings portion of the withdrawal.

Should I use my 529 to study abroad?

A 529 plan can be a great way to cover the cost of school overseas. To figure out if this is a good fit for your family, first make sure that your child wants to attend an eligible school and that you plan to use the funds for qualified purposes.

Next, you can compare program costs. If your child enrolls in a study abroad program for one or two semesters, they’ll pay tuition and fees to their home university. But if they’re earning a degree through the host school, the school determines the cost of attendance. It might make sense to reserve 529 funds for expenses at the child’s home school if the international school offers a much lower cost.

If the study abroad program is offered through a third-party service, keep detailed records of the expenses you pay. That way, you’ll be prepared if the IRS audits your tax return and tries to challenge whether the expenses are eligible for tax-free withdrawals.

Reasons why you might not want to use your 529 for study abroad

While using a 529 plan can help fit the bill for study abroad, you may decide it is better not to use the funds for this purpose. For one, 529 funds may be subject to taxes in other countries because the money is only recognized under U.S. tax code.

Additionally, if you are applying for a study abroad program through a U.S.-based school, you will pay the tuition of that school rather than the school you are attending. If the school where the study abroad program is being taught is cheaper to attend, it may make more sense to pay for the program another way rather than using the 529 plan through the domestic school.

Other ways to pay for study abroad

While a 529 plan can be a great way to cover your study abroad expenses, it may not be enough, or the school you’re attending may not be eligible. Here are some other potential ways you can get the funds you need to pay for your experience:

• Apply for scholarships: The U.S. Department of State provides a list of scholarships available for students studying abroad in different countries. These scholarships are typically provided by foreign governments. You can also use scholarship search engines to seek out financial aid from private organizations.
• Manage your expenses: Unless your study abroad plans are already set in stone, consider going to a country with a lower cost of living. For example, South America and Eastern Europe may be cheaper options than Western Europe. Compare program costs between universities and try to find the right fit for your budget.
• Get a job: Depending on which country you’re planning to study in, you may have opportunities to work while you complete your coursework. Research visa requirements beforehand to understand what your options will be. You can also take a break between semesters and work at home before you travel.
• Apply for student loans: Some foreign universities are eligible for federal financial aid, including student loans . There are also private lenders that offer student loans specifically for studying abroad. Federal loans are typically more beneficial in the long run, so focus on those first, then consider private student loans as a last resort.

Take your time to map out your plans for studying abroad and how you’ll cover the expenses. The sooner you start with this process, the easier it will be to enjoy your study abroad experience without worrying about the financial side of things.

The bottom line

529 plans are one financial tool that you can use to pay for study abroad programs and can be a useful way to cover the expenses of education overseas. Consider all costs including taxes when factoring your decision and determine if using a 529 plan to pay for your education makes sense for you.

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Can you use a 529 plan to pay for travel costs?

By Mark Kantrowitz

November 16, 2018

You cannot use a 529 plan to pay for travel and transportation costs. The earnings portion of a distribution from a 529 that is used to pay for travel and transportation expenses will be considered a non-qualified distribution . Non-qualified distributions are taxable at the beneficiary’s rate, plus a 10% tax penalty, as well as recapture of state income tax benefits attributable to the distribution.

This applies to all travel and transportation costs, including transportation to and from the college and travel for international study and study abroad programs.

However, there may be an exception if the university charges any travel and transportation costs as part of a comprehensive tuition fee, or the fee is identified as a fee that is “required for enrollment or attendance” at the college. 

A college’s official cost of attendance , as defined in the Higher Education Act of 1965, includes an allowance for transportation expenses. The definition of qualified higher education expenses in the Internal Revenue Code of 1986, however, is different. It does not include transportation expenses, miscellaneous personal expenses, dependent care costs, loan fees and licensing fees, and room and board is limited to students who are enrolled on at least a half-time basis.

Qualified higher education expenses are limited to tuition, fees, books, supplies, equipment, special needs services, computers (including peripherals, software and internet access), and, if enrolled at least half time, room and board.

Students can ask their college to increase the cost of attendance to reflect their actual travel and transportation costs. However, the family will still not be able to use a tax-free distribution from a 529 plan to pay for the travel expenses. Increasing the cost of attendance may enable the student and parents to borrow more federal education loans to cover the costs.

Some colleges have emergency aid funds that may cover the cost of repairs to the student’s car if the student is a low-income commuter student. But, emergency aid funds will generally not cover the cost of routine travel costs, except perhaps the cost of public transportation.

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529 & GET funding

State of washington college savings plan.

Washington State College Savings Plans, known as WA529 offer two types of 529 plans: the DreamAhead College Savings Plan and the Guaranteed Education Program (GET). These funds can cover qualified higher education expenses, including many, but not all, UW study abroad programs.

UW Facutly-led Programs & University Exchanges

For UW Faculty-led Programs and University Exchanges, you can use DreamAhead or GET funds because UW charges your student account and collects fees for your programs. Program fees appear on your UW student account.

Partner and Direct Enrollment Programs

For Partner and Direct Enrollment Programs, you pay program fees directly to the program provider. Only the UW Study Abroad fee is charged to your student account. The program fee charges do not show on your UW student account. Most program providers may not be approved by the U.S. Department of Education for 529 College Savings Plans eligibility. Contact WA529 College Savings Plans to verify eligibility.

To use Dreamahead or GET funds for study abroad, follow the instructions found on the Student Fiscal Service page .

Other 529 Plans

529 plans (legally known as qualified tuition plans) from other U.S. states can also cover qualified higher education expenses for many, but not all, UW study abroad programs.

For UW Faculty-led Programs or University Exchanges, you can use 529 funds because UW charges your UW student account and collects fees for your program. Program fees appear on your UW student account. While most 529 plans allow funds to be used at eligible institutions nationwide, some 529 plans may have restrictions or preferences for in-state institutions, so be sure to check with your 529 plan for eligibility.

For Partner and Direct Enrollment Programs, you pay program fees directly to the provider, only the UW Study Abroad Fee is charged to your UW student account. In many cases, the program provider is not approved by the U.S. Department of Education for eligibility with 529 plans. You can check the eligibility of the partner program provider by contacting the provider or consulting the Federal School Code List.

If you are distributing the 529 funds directly to your bank account, it is important to save all receipts, bills, and other documentation related to the expense.

Not all expenses related to studying abroad are considered qualified expenses for 529 plans. Check out the resources below to learn more about using 529 funds for studying abroad:

• Investor.gov: Saving for Education – 529 Plans
• College Savings Plans Network

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529 college savings plans for american expats living abroad.

By Expat News

The average cost of college education has been constantly rising. Per the US Department of Education, the price to attend a public university has increased 42% between 2001 and 2011. The cost to attend a private institution has increased 31% for the same time period. US taxpayers are advised to start planning for the children’s education in advance. Although, American expats reside overseas, they still have an access to a wide range of college savings plans. Before making contributions to any education savings account, US taxpayers are advised to review their retirement plans like Roth IRA or Traditional IRA for American expats too to make sure that they have a proper allocation.

This is the latest email from one of our clients, American expats living abroad. “I live in Switzerland with a family. My daughter is only three years old. However, I would like to start planning for my child’s education now and would like to learn more about different college savings plans.” The purpose of this article is to provide a summary of the most popular questions about US college savings plans like a 529 Education Savings Account.

529 college savings plans for American expats living abroad

What is a 529 education savings account.

A 529 education savings account was introduced by Congress back in 1996. A 529 account is an attractive option since the earnings on contributions to the plan grow tax-free. Moreover, if the distributions from the plan are used to pay for qualified higher education expenses, then these distributions are tax-free. The funds from 529 education savings account can be used at any accredited university in the US as well as some qualifying institutions abroad.

Can an American expat living abroad open 529 college savings plans?

Every state has at least one 529 education savings plan. Some states offer several 529 college savings plans. Although, American expats are not residents of any particular state, they can still open 529 college savings plans. American expats will not receive a state tax deduction for the contributions made to 529 education savings account because they’re not required to file a state tax return.

What is a difference between a 529 prepaid tuition program and a 529 savings program?

US taxpayers as well as American expats living abroad can choose between two 529 plans.

The 529 prepaid tuition program is a 529 account that is used to purchase future tuition at today’s rate. Parents, grandparents or any other party can start a prepaid tuition program to pay for the future college tuition. On the other hand, a 529 savings program is the college savings plan because it enables its participants to save money in a college savings account. Any contributions to this college savings plan as well as earnings on the account will be used to pay for qualified education expenses tax-free. Each 529 education savings account offers a wide range of investment options so it is essential to choose the right plan that meets the individual requirements of American expats.

How to choose college savings plans for American expats living abroad?

As with as with any investment plan, it is essential to review three most important criteria.

• Low fees . American expats must target low administration fees and passively managed funds.
• Investment options. 529 plans should offer a wide variety of investment options to satisfy various risk aversions: 100% equity funds, fixed income funds, stable value funds, as well as a variety of equity and fixed income options, principal protected options and FDIC insured bank options.
• “Age-based allocation strategy” . It is essential to adjust the portfolio as the child approaches the college age. Consequently, it is beneficial to choose college savings plans with the age-based allocation strategy in which the age of the beneficiary determines the specific mix of investments.

Can 529 savings plans be used for foreign education institutions?

Per the Federal student aid website the distributions from 529 savings plans can be used to pay for qualified education expenses in more than 451 foreign education institutions. To get a list of all foreign institutions, please go to www.fafsa.ed.gov.

How much can an American expat contribute to the 529 education savings account per year?

Each US taxpayer can contribute up to $14,000 per year per child in 2013. The contribution up to $14,000 qualifies for the annual gift tax exclusion so there is no gift tax return filing requirement. American expats can choose to make a lump sum contribution of up to $70,000 ($140,000 for joint filers) and spread this amount over 5 years to avoid federal gift tax. The advantage of making a lump-sum contribution is a tax-free growth of investment. Consequently, it is better to invest a larger amount as early as possible to generate a higher return.

Are all distributions from 529 savings plans tax-free?

The distributions from 529 savings plans are free if they are used to pay for qualified college expenses. However, any withdrawals for “non-qualified” distributions will be subject to federal taxes, 10% federal tax penalty on the earnings as well as state taxes. One of the ways to avoid this situation is to name a new beneficiary like another child or grandchild.

Do American expats have other college savings plans to choose from?

Americans living abroad can choose from a wide variety of foreign investments. However, they should avoid PFICs or foreign mutual funds because they will be subject to enormous US filing requirements and punitive taxes on their PFIC investments .

Choosing college savings plans might be a challenging task for any taxpayer including American expats living abroad. It is beneficial to review the options online and to discuss investment strategies with a reputable investment advisor.

Related posts:

• Federal Student Financial Aid for American Expats Living Abroad
• Traditional IRA Rules for American Expats Living Abroad
• Obamacare and American Expats Living Abroad

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Best 529 Plans to Save for College 2024

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• 529 plans are education savings plans that family and friends can open for long-term growth and tax-advantages. 
• 529 plan tax benefits include tax-free growth and tax-free withdrawals on qualifying academic expenses. 
• The best state 529 plans have low minimum requirements, low fees, diverse investment options, and a tax deduction benefit. 

A 529 savings account is an efficient way to save and invest toward your child's future education expenses that could also earn you a tax break on your state income tax return. Opening a 529 plan early can reduce future out-of-pocket expenses. But not all 529 plans are built the same.

It's important to note that not all 529 accounts are built the same. The good thing is that a majority of 529 plans are eligible for out-of-state residents, so you're not necessarily limited to the programs attached to your own state. However, you may lose some of the strongest benefits with an out-of-state plan. 

10 best 529 plans in 2024

• Bright Start Direct-Sold College Savings Program (Illinois)
• U.Fund College Investing Plan (Massachusetts)
• Oregon College Savings Plan
• Ohio's 529 Plan CollegeAdvantage
• UNIQUE College Investing Plan (New Hampshire)
• ScholarShare 529 (California)
• Pennsylvania 529 Investment Plan
• my529 (Utah)
• New York's 529 College Savings Program

The best 529 plans are state-run programs managed by brokerages, banks, and other financial institutions. While similar to the best custodial brokerage accounts , 529 college savings accounts have their own rules, contribution limits, and tax advantages.

Make sure to thoroughly compare 529 plan reviews and the best performing 529 plans to find the right education savings account for you. 

Here are some of the best 529 plans by state as picked by Business Insider's editors in 2024.  

1. Bright Start Direct-Sold College Savings Program (Illinois)

Bright Start Direct-Sold College Savings Program is one of the available 529 plans with low fees, including no minimum deposit requirement. You can invest in multi-firm or index-based age-based investment options (including six target-risk portfolios, 17 individual fund investment portfolios , and mutual funds from Vanguard, DFA, T.Rowe Price, and more. 

Bright Start also offers one of the best tax advantages for Illinois residents: married couples can deduct up to $20,000 annually. ($10,000 per individual taxpayer). Moreover, qualifying expenses aren't subject to state income tax. 

Account minimum: $0

Fees and expenses:  0.10% program management fee, $0 account maintenance fee, 0.02% to 0.67% fee for portfolios

Total asset-based expense ratio: 0.07% to 0.77%

2. U.Fund College Investing Plan (Massachusetts)

This Fidelity-managed, Massachusetts advisor-sold 529 plan offers an age-based, static portfolio and an interest-bearing account option of Fidelity mutual funds and index funds portfolio. There's no account minimum and no annual account fees, but you must meet a $15 monthly contribution minimum requirement.

You can get up to a $2,000 state income tax deduction ($1,000 for individuals). 

Fees: up to 0.45% program management fee

Total asset-based expense ratio:  0.11% to 0.95%

3. Oregon College Savings Plan

Who can open an account:  Anyone in the US 

Sumday Administration, LLC manages this Oregon-based, direct-sold savings plan. For a $25 minimum, you'll access mutual funds from various fund families (such as Vanguard, T.Rowe Price, and American Beacon) and an FDIC-insured option. It offers age-based/enrollment year portfolio options and static investment portfolio options.

Rather than a tax deduction, investors get a refundable tax credit of up to $360 (varies by income).

Account minimum: $25 ($5 per month with automatic investment plan)

Fees: 0.20% program management fee

Total asset-based expense ratio:  0.20% to 0.65% 

4. Ohio's 529 Plan, CollegeAdvantage

For a low $25 minimum, the Ohio-based 529 direct-sold savings plan offers a diverse selection of age-based, enrollment-based Vanguard and DFA mutual fund portfolios with tax-free growth. Plus, an individual fund portfolio option. You can also invest in CDs through a Fifth Third Bank savings account ($500 minimum). Single and joint filers can get a tax deduction of up to $4,000 annually. 

The downside of Ohio's 529 Plan is there's no online gift portal to share with friends or family for easy contributions. Instead, you can only receive gift certificates or mail-in-gift certificates. 

Account minimum:  $25 minimum ($500 for Fifth Third Bank)

Fees:  0.105% managers fee, 0.02% state fee, 0.107% program management fee, between 0.02% to 0.31% on portfolios

Total asset-based expense ratio:  0.145% to 0.435% (none for Fifth Third Bank option)

5. UNIQUE College Investing Plan (New Hampshire)

Fidelity manages this low-cost direct-sold savings plan of actively managed mutual funds and index funds for no minimum deposit. It offers age-based/enrollment year portfolio options and static investment options (including interest-bearing accounts and stable value portfolios). If you opt-in for the automatic investment plan, you must meet the $15 monthly contribution (or $45 per quarter). 

New Hampshire's UNIQUE College Investing Plan offers one of the largest maximum contribution limits of up to $614,551 per beneficiary. However, it does not offer an annual tax deduction benefit.

Fees:  up to 0.17% program management fee, up to 0.78% underlying investment fees

Total asset-based expense ratio:  0.10% to 0.95%

6. ScholarShare 529 (California)

ScholarShare 529 is one of the best 529 plans for California residents, and could be a good option for out-of-state participants. This college savings 529 account is a flexible plan offering state-tax incentives, an easy-to-access gifting platform, and unique investment portfolio options (age-based, enrollment-based, multi-fund, individual-fun, and a principal protection portfolio. This California 529 plan even offers an ESG portfolio option for socially responsible investing, 

Although contributions aren't eligible for tax deductions, earnings grow tax-deferred. Remember that all withdrawals for qualifying academic expenses from 529 plans are tax-free. 

Fees: up to 0.06% program management fee (varies by portfolio option), 0.03% to 0.35% underlying investment fee

Total asset-based expense ratio:  0.04% to 0.41%

7. Pennsylvania 529 Investment Plan

With Pennsylvania's 529 plan, you can access 26 Vanguard investment options, including multi-fund static portfolios based on risk tolerance, Target Enrollment portfolios of Vanguard mutual funds, and a socially responsible equity portfolio. 

The 529 account is managed by the Pennsylvania Treasury Department, Vanguard, and Ascensus College, with no minimum requirement (subsequent deposits must be at least $1) and up to $36,000 annual tax deduction ($18,000 for single filers) for in-state and out-of-state residents.  

Fees: $10 account maintenance fee (waived for automatic investing accounts), 0.29% program management, between 0.02% and 0.12% for underlying investments

Total asset-based expense ratio:  0.1875% to 0.2875%

8. my529 (Utah)

my529 is a direct-sold savings plan consisting of Vanguard and Dimensional mutual funds, plus a PIMCO Interest Fund account option. There are also FDIC-Insured accounts available through Sallie Mae Bank and US Bank. my529 offers a wide range of age-based, enrollment-based, and static portfolio options, such as a customized static portfolio of up to 30 hand-picked underlying funds. 

This 529 plan's tax benefits are more limited than other plans on this list. Utah residents can receive a tax deduction of 4.65% up to $224 per year (up to $112 per year for single filers). 

Fees: 0.10% to 0.13% program management fee, up to 0.325% underlying investment fee

Total asset-based expense ratio:  0.100% to 0.221%

9. New York's 529 College Savings Program

New York's low-cost 529 College Savings Program is a direct-sold plan offering a huge selection of diverse Vanguard mutual funds through age-based/enrollment year portfolios (including risk level options) and static investment portfolios (including multi-fund options, individual fund options, and an Interest Accumulation portfolio option). 

Moreover, there are no underlying investment expenses, as it's included in the program management fee. Joint filers can deduct up to $10,000 a year ($5,000 for individuals). 

Account minimum: $o

Fees: 0.12% program management fee

Total asset-based expense ratio:  0.12%

10.  Alaska 529

Alaska 529 (previously called the University of Alaska College Savings Plan) is a low-cost account of age/enrollment-based and static portfolios of T.Rowe Price mutual funds. Invest in unique multi-fund options like an Equity Portfolio, University of Alaska Portfolio, Fixed-Income Portfolio, and more.

Not only does Alaska 529 have one of the lowest expense ratios, but it also offers additional benefits for future University of Alaska students. However, there are no tax deduction benefits. 

Account minimum: $25

Fee: up to 0.05% program management fee, underlying investment fee ranging from 0.07% to 0.78%

Total asset-based expense ratio:  0.15% to 0.87%

Finding the Best 529 Plans for Your Needs

The best way to choose a 529 plan is to start with your state's own plan, as you're more likely to benefit from in-state exclusive tax deductions or credits from your 529 plan contributions. Remember, although many states offer tax deduction benefits, it is not always available to out-of-state participants. 

Plus, some 529 plans don't offer tax deductions. For example, Pennsylvania's 529 plan offers one of the more lucrative tax advantages, up to a $36,000 annual tax deduction for both in-state and out-of-state participants. But Alaska's 529 doesn't offer any sort of tax deduction for any participant. 

Other factors you'll want to take into consideration are the: 

• Minimum investment requirements: Many 529s are generally low-cost with no (or low) minimum deposit requirement to open. Still, evaluating the cost of joining a program and whether you're obligated to contribute a certain subsequent amount over time should factor into your decision. 
• Fees and costs: High fees can eat away at your investment gains. Fees associated with 529s are program management fees, account maintenance fees, and underlying investment fees. 
• Investment options: 529s generally offer a range of mutual funds and index funds from different brokerages and banks, so make sure you pick a program with funds that align with your preferences. Most 529s offer static, age-based, and enrollment-based portfolios. But there are also more unique portfolio options, such as ESG portfolios or interest-bearing, that aren't available with all 529 programs. 
• Type of plan:  When deciding which 529 plan is best for you, consider whether you'd like to participate in an education savings plan or a prepaid tuition plan. Most of the best 529 plans are normally education savings plans, but you may prefer to lock in tuition rates and opt-in for a pre-paid plan. 

If your state's plan doesn't have what you're looking for, compare other eligible out-of-state plans with low fees, diverse investment options, and worthwhile tax benefits. Make sure to understand the specific 529 account rules before opening an account.

Some great resources to compare and research different 529 programs are Savingsforcollege.com and Morningstar . Comparing these different program's 529 tax benefits, rules, and limits. 

If you're having trouble figuring out how to choose a 529 plan, you can consult a CFP specializing in education savings plans for personalized insight and guidance on 529s. 

Best 529 plans — Frequently asked questions (FAQs)

A 529 plan is a tax-advantaged, state-run education savings program for parents to save on behalf of a child. They're funded with after-tax dollars and grow tax-free until withdrawal. Qualifying withdrawals for 529 plans (such as K-12 tuition, school supplies, etc.) are also tax-free. Most states allow out-of-state residents to participate in their plans.

Utah's my529 is one of the top 529 plans for college savings, earning a Gold rating from Morningstar's Analyst Rating for 12 consecutive years. Utah my529 is a top-performing 529 savings account due to its various portfolio options such as enrollment and static investment options, plus the option of a customized portfolio. 

The benefit of a 529 plan are long-term, tax-free growth and the power of compound interest. Similar to a Roth IRA, 529 savings plans are funded with after-tax dollars. You can also get tax-free withdrawals with qualifying education expenses like college tuition, student loan repayments, school supplies, and room and board. 

Some disadvantages associated with investing in a 529 savings plan are the limited investment choices and potentially high fees. One of the most significant disadvantages is that contributing to a 529 account could also impact your eligibility for federal aid.

Which 529 plan is best for you may be your own state's plan as you are more likely to benefit from an in-state tax deduction. However, if your state's plan is not a good fit, you can consider another state to find what 529 plan is best for you based on fees, tax benefits, and investment options. You can learn more about 529 plans with comprehensive sites like savingforcollege.com.

Our Methodology: How We Reviewed The Best 529 Plans

Business Insider's rating methodology for investment platforms examines dozens of 529 plans to find the best of the best for education savings. Find the best perks, tax benefits, fees, and more with our guide to the best 529 plans.

People may have varying risk capacities and financial goals they're working toward, but you'd be hard-pressed to find someone who doesn't prefer a cheaper way to invest. Therefore, the cost was a huge factor in determining our list. 

Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards .

Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.

**Enrollment required.

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Blog: Can I Use My 529 Funds to Study Abroad?

Saving for a child’s college education is an important financial goal for many parents. In the U.S., 529 plans are a popular and tax-advantaged way of saving for college. However, there may be some questions and considerations when your child wants to use their 529 funds to study abroad. In this blog, we discuss which foreign universities are 529 eligible, and other considerations you should take into account.

Can a 529 plan be used for study abroad?

Yes, a 529 plan can be used to study abroad. 529 funds can be used to pay for qualified higher education expenses at eligible international schools or universities. They cannot be used to cover day-to-day expenses or travel costs. It’s also important the school and the withdrawals meet IRS rules to avoid taxes and penalties.

Which foreign universities are 529 eligible?

For an educational institution to be eligible, it must participate in the U.S. Department of Education’s federal student aid programs. Many accredited colleges, universities, and vocational schools worldwide meet this requirement . However, you must confirm the eligibility of the specific institution where you plan to enroll.

What college expenses are 529 eligible for studying abroad?

Make sure that you are familiar with the rules regarding 529 plans before your child puts down a deposit on an expensive study abroad program. Some of the college expenses that are covered for studying abroad include:

• Tuition and fees.
• Books, textbooks, supplies, and equipment.
• Room and board (the 529 beneficiary must be enrolled at least part-time and their eligible room and board can’t exceed the school’s published cost of attendance estimate for those expenses.)

Some of the college expenses are not covered for studying overseas include:

• International health insurance and medical costs
• Travel expenses
• Basic living expenses
• International cell phone costs
• Sports and activity fees
• Foreign transaction fees

What happens if my child uses their 529 funds for nonqualified expenses?

If your child uses their 529 funds to pay for nonqualified expenses, they will need to pay income tax on those withdrawals and a 10% penalty on the earnings portion of the withdrawals. They may also be subject to taxes and penalties levied by the state in which the account is held. Additionally, any withdrawals made must be in the same calendar year that the qualified expenses are paid.

There are rare exceptions to withdrawing without penalty, such as veteran’s assistance, attending a U.S. military academy, disability, or death.

Can my child use their 529 to live off campus if studying abroad?

Yes, as long as they are enrolled at least half-time. However, the cost of living off-campus must not exceed that of the published room and board at their school. If it is more, then they will need to cover that difference.

If they decide to stay abroad over summer break without taking any classes, they likely cannot use their 529 funds to pay for room and board. This can be so even if those were qualified expenses during the academic year.

What are the tax implications of using a 529 plan for international schools?

It is important to understand the tax implications of using a 529 plan for overseas education. While qualified distributions from 529 plans used for eligible expenses are generally tax-free at the federal level, state tax rules may vary. Some states may impose limitations or restrictions on using 529 funds for foreign institutions.

It’s best to consult with a tax professional, financial advisor, or 529 plan administrator. They can provide specific guidance on your state’s regulations to ensure that there aren’t any unexpected tax consequences.

Can you continue to invest in a 529 plan while living overseas?

You can continue to invest in 529 plans while living abroad. Many 529 plans offer state tax deductions, but if you aren’t filing state tax returns then you won’t receive this benefit.

Using 529 plans to study abroad

529 plans can generally be used for qualified higher education expenses at eligible universities abroad. However, it is essential to verify the eligibility of the specific institution and consider any applicable tax implications and fees associated with overseas expenses. It’s essential to understand the regulations and plan accordingly to ensure that your child can make the most of their 529 savings while pursuing education internationally.

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New FAFSA rules opened up a 'grandparent loophole' that boosts 529 plans

The 529 education savings plan got a couple of big upgrades in 2024 as a tool to save and pay for school.

Starting this year, Congress is allowing up to $35,000 in leftover savings in the plan to roll over tax-free into Roth individual retirement accounts, eliminating fears unused money could forever be trapped or incur taxes. Then, at the end of December, the Department of Education revised the Free Application for Federal Student Aid (FAFSA) , creating the so-called grandparent loophole.

The grandparent loophole allows grandparents to use a 529 plan to fund a grandchild’s education without affecting the student's financial aid eligibility. Previously , withdrawals could have reduced aid eligibility by up to 50% of the amount of the distribution.

“A $10,000 distribution from a grandparent-owned 529 may reduce the following aid award by $5,000” under prior rules, wrote William Cass, director of wealth management programs for Boston, Mass.-based asset manager Putnam.

What is the grandparent loophole?

Beginning with the new 2024-25 FAFSA launched late last year , a student’s total income is only based on data from federal income tax returns.  That means any cash support, no matter the source, won’t negatively affect financial aid eligibility.

Learn more: Best personal loans

Though it’s called the “grandparent loophole,” any nonparent, including friends and relatives, can use it.

Previously , distributions from any nonparent-owned 529 plan were included as untaxed student income, which reduced eligibility for need-based aid. To avoid this, people got crafty with timing distributions.

Since the prior FAFSA was based on financial information going back two years, people waited until the last two years of college before tapping nonparent 529s to minimize the negative effect withdrawals would have as income.

Since the new FAFSA doesn’t count any of these distributions as income, no one needs to worry about any of this anymore, said Tricia Scarlata, head of education savings at J.P. Morgan Asset Management.

Find the right one: Best 529 plans of April 2024

Other advantages of the 529 plan

The grandparent loophole and Roth IRA rollover are just the latest benefits added to the 529 plan, which Scarlata says is her favorite education savings plan .

“It’s the plan you can contribute the most amount, get tax-free growth and withdrawals and some in-state tax benefits,” she said.

Other advantages include:

• Contributions aren’t tax-free on a federal basis, but withdrawals are tax-free for qualified expenses like tuition and fees, books and other supplies or up to $10,000 annually for K-12 tuition.
• Most states will give you a tax break for contributions if you invest in the state’s 529 plan. Check your state’s rules.
• A handful of states offer “tax parity,” which means you can deduct at least some of your contributions to any plan in the United States, not just the one provided by your state.
• Contributions are considered gifts . For 2024, the annual gifting limit is $18,000 for an individual or $36,000 for married couples so you can contribute up to that amount in a 529 without incurring the IRS’ gift tax. That amount is per beneficiary so parents, grandparents and others may gift that much annually to each student.
• “Accelerated gifting” allows you up to five years of gifting in a 529 in one lump sum of $90,000 for an individual or $180,000 for a couple. If you can afford it, this allows the full amount to grow tax-free longer.
• You can invest contributions and allow the balance to grow tax-free. Despite this benefit, Scarlata said about half of Americans keep their money in cash and cash-equivalents like certificates of deposit (CDs) or savings accounts.  With college tuition rising about 8% annually , keeping those types of assets in your 529 isn't going to help you pay for college, she said. The broad-market S&P 500 stock index , on the other hand, returns 10% annually on average, giving you a shot at ramping up your savings.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and  subscribe to our free Daily Money newsletter  for personal finance tips and business news every Monday through Friday.

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Where Americans Are Traveling in 2024: By the Numbers

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Americans are traveling abroad in droves.

The number of U.S. citizens flying to international destinations reached nearly 6.5 million passengers in March, according to the International Trade Administration. That’s the highest March total in over five years and shows that the post-pandemic “revenge travel” trend is the new normal.

It wasn’t just March, which usually sees a spike in international departures for spring break. In every month of 2024 so far, more Americans left the country than last year and 2019. These trends point to a blockbuster summer for overseas travel.

Nearly half of Americans (45%) plan to travel by air and/or stay in a hotel this summer and expect to spend $3,594 on average, on these expenses, according to a survey of 2,000 U.S. adults, conducted online by The Harris Poll and commissioned by NerdWallet.

That's despite rising travel prices that have caused some hesitancy among would-be travelers. About 22% of those choosing not to travel this summer cite inflation making travel too expensive as a reason for staying home, according to the poll.

So where are traveling Americans going? And what does it mean for those looking to avoid crowds of tourists and higher travel prices?

New travel patterns

Nearly every region in the world saw an increase in U.S. visitors in March 2024 compared with March 2023, according to International Trade Administration data. Only the Middle East saw a decline of 9%. Yet not every region saw the same year-over-year bump. U.S. visitors to Asia saw a 33% jump, while Oceania and Central America each saw a 30% increase.

Comparing 2024 with 2023 only tells part of the story, however. The new patterns really emerge when comparing international travel trends to 2019. For example, Central America received 50% more U.S. visitors in March 2024 compared with March 2019. Nearly 1.5 million Americans visited Mexico, up 39% compared with before the pandemic. That’s almost as many visitors as the entire continent of Europe, which has seen a more modest 10% increase since 2019.

Only Canada and Oceania saw fewer visitors in March 2024 than in 2019, suggesting that interest in these locations has not rebounded. Indeed, the trends indicate a kind of tourism inertia from COVID-19 pandemic-era lockdowns: Those destinations that were more open to U.S. visitors during the pandemic, such as Mexico, have remained popular, while those that were closed, such as Australia, have fallen off travelers’ radars.

Price pressures

How these trends play out throughout the rest of the year will depend on a host of factors. Yet, none will likely prove more important than affordability. After months of steadiness, the cost of travel, including airfare, hotels and rental cars, has begun to sneak up again.

About 45% of U.S. travelers say cost is their main consideration when planning their summer vacation, according to a survey of 2,000 Americans by the travel booking platform Skyscanner.

That’s likely to weigh further on U.S. travelers’ appetite for visiting expensive destinations such as Europe, while encouraging travel to budget-friendly countries. It could also depress overall international travel as well, yet so far, Americans seem to be traveling more.

For those looking to avoid crowds while maintaining a budget, Skyscanner travel trends expert Laura Lindsay offered a recommendation many of us might need help finding on a map.

“Albania has been on the radar of travelers looking for something different,” Lindsay said. "Most people have yet to discover it, but flights and tourism infrastructure are in place, and there are fewer crowds in comparison to trending European destinations like Italy, Greece, or Portugal.”

On the flip side, American travelers looking to avoid crowds of compatriots would do well to avoid Japan, which has seen a staggering 50% increase in U.S. tourists between March 2019 and 2024.

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You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024 , including those best for:

Flexibility, point transfers and a large bonus: Chase Sapphire Preferred® Card

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Flat-rate travel rewards: Capital One Venture Rewards Credit Card

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Autism makes travel a challenge. Here’s how I learned to cope

Busy places and unexpected events used to send me into meltdown on holiday. An autism diagnosis helped me to adapt my plans and rediscover the joy of travelling

W andering hand-in-hand through the medieval streets of Bologna, my boyfriend and I were in awe of the sweeping porticoes and distinctive rust-red brickwork of the city. It was our first holiday together. We’d wanted to find somewhere beyond the obvious that would marry our respective interests in architecture and history. Bologna was the perfect fit.

We admired the Church of Santa Maria della Vita , with its imposing baroque interior, lavishly decorated in colourful frescoes and marble carvings. We caught a little red and blue express train up into the hills to the Santuario della Madonna di San Luca , and climbed the bell tower of the Basilica di San Petronio for panoramic views across the city.

But after one particularly long, hot day on our feet, with our stomachs clamouring to be fed, my mood began to shift. With the setting of the sun came the rising of my rage, as we struggled to agree on where we wanted to eat. In a city nicknamed La Grassa (“the fat one”), we weren’t lacking in options; in fact, it was the sheer number of well-reviewed eateries that was overwhelming.

Eventually we decided on pizza, and my boyfriend anxiously led us through sun-dappled alleyways, seeking out a little hole-in-the-wall spot with stellar reviews on Google. Looking back now, I’m ashamed of my reaction once we arrived. Instead of excitedly tucking into the steaming, cheese-drenched deliciousness before me, I burst into tears, refusing to order. And why?

Because they were slices .

In my mind, getting pizza meant that we’d be presented with a whole pizza. The idea of just grabbing a slice or two felt abhorrently wrong. It truly felt to me, in that moment, like I was being asked to do the impossible. Instead, we had to find a standard bistro and get me the right kind of pizza. Scrolling through photographs from that trip for this article, I find a snapshot of my boyfriend opposite me at the table, looking as if he’d just (barely) survived the fury of the Visigoths during the sacking of Rome.

It wasn’t until three years later – in spring 2020, when I was diagnosed as autistic – that this fragment of my life story, and many others like it, finally began to make sense.

B eing autistic means that life is a challenge, every day, in myriad tiny ways most others cannot see. Autistic people often grapple with sensory, social and communication challenges that manifest differently in each of us. As a toddler, for instance, I couldn’t stand the touch of grass on my skin. My parents could pop me down on a blanket by our tent during camping trips, safe in the knowledge that I wouldn’t stray. The same went for sand – putting me down to build a sandcastle on the beach only led to banshee-esque wailing until someone picked me up. When I got older, I preferred to stay by the tent and read my books than risk the chaotic din of the campsite playground. I’ve also always found it difficult when confronted with the unexpected. That could be anything, from a last-minute change of plans to something simply not turning out the way I’d pictured it in my head.

Relentlessly busy places are a terrifying prospect for those of us predisposed to sensory overwhelm. The best way I can describe how I experience this sensation is to ask you to imagine that the whole world has climbed into your chest. It then sits there, heavy and loud and bright, thrumming with energy, too much energy, more than any one person could hold within themselves. And yet, that’s what’s expected of us, day in, day out.

Fortunately, societal awareness of how autistic people interact with public spaces has grown over the past few years, thanks to the rise of lived experiences shared on platforms such as TikTok and Instagram. The thriving autistic creator communities online were a lifebelt for me when I was first diagnosed, providing both insights into my own behaviour and suggesting coping mechanisms.

Initiatives such as the sunflower lanyard scheme are also having a real impact on how employees in train stations, airports, bus terminals and so on are trained in making these places more accessible to those with hidden disabilities. What I have learned is that many challenges can be overcome with sufficient planning and support from those around me. Through much trial and error over the last four years, I’m making real progress towards learning how to adapt my holiday plans to accommodate my needs. I now have a self-made kit for mitigating sensory overwhelm that I take with me whenever I travel: sunglasses, noise-isolating earplugs, noise-cancelling headphones, a fidget toy or two and a safe food to snack on (a favourite cereal bar, for example). Having avoided meltdowns by using these items in the past, I now can’t imagine travelling without them.

The process of writing my book, The Autistic Guide to Adventure , has provided many useful insights too. Designed to introduce younger readers from the autistic community to a variety of different outdoor activities, the book suggests how to best approach them from sensory, social and communication perspectives.

Take kayaking, for instance, a popular holiday activity in the UK thanks to our miles upon miles of public waterways and easily accessible coastline. I’ve kayaked on family holidays since a young age. Before I knew I was autistic, however, I’d never have thought to give myself extra time to get used to sitting in a new boat in a new location, testing the feel of a buoyancy aid or holding the paddle properly. Yet something as simple as taking the opportunity to do that – on dry land, before the kayak even gets near the water – can make a real difference to how comfortable and confident an autistic person might feel about trying this new activity. Most activity providers are understanding and would be happy to facilitate this, if you let them know in advance.

Other simple adaptations to recreational activities include using walking poles for all levels of hiking – not only on mountains – and bringing an inflatable for wild swimming. These help to maintain balance, something that many autistic people find hard because of difficulties regulating their vestibular system.

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There will never be one single trip or destination that’s perfect for every autistic person, because our individual strengths, struggles and support needs are so different. But if we each plan ahead and choose what to do or where to go based on our known sensory sensitivities, communication preferences and social battery life, every trip has the potential to be perfect just for us .

M ost recently, my boyfriend and I took a much-anticipated trip to the Arctic Circle, visiting Tromsø. There’s a key difference between this holiday and our stay in Bologna five years earlier: the weather. It’s common for autistic people to have strong preferences when it comes to temperature – in my case, I’ll always choose cold over hot.

That’s why Tromsø in December was a sensory dream for me. Plunged into polar night, the light was never brighter than a muted lilac haze for a few short hours around midday. The temperature was consistently below freezing; the snow lay piled in marshmallow-soft heaps along pavements and roadsides. It was as far a cry from the lively streets and humid air of summer in Bologna as you could get, and it was perfect.

Learning from previous experience, we planned exactly where we wanted to eat during the trip. We spent several cheerful mealtimes huddled by the fire pit at Raketten Bar and enjoyed Pølse , a hotdog stand in a sunshine-yellow kiosk dating back to 1911.

Autistic people often prefer the company of animals to other humans, but it’s not something I’d ever thought to factor into my travel plans before. In Tromsø, we ended up spending three out of our five days on activities involving animals: huskies, whales and reindeer. It was, without a doubt, one of the best decisions we could have made.

The joy of losing myself in a frenzied pack of newfound canine friends radiates from my face in photos from the day we went husky sledding.

Given that travel is something I treasure, it’s a relief to realise that my ability to do it is not limited by being neurodivergent. On the contrary, I truly believe some of my many travel experiences have been – and will continue to be – enhanced by the fact that my brain works on a different wavelength. When I close my eyes, I can still see the play of lavender light on the snow-capped mountains surrounding Tromsø. I’m immediately transported back to a place that felt like home to my soul, soothed without having to take even a step outside.

The Autistic Guide to Adventure by Allie Mason is published by Jessica Kingsley (£14.99 ). To support the Guardian and Observer, buy a copy at guardianbookshop.com . Delivery charges may apply

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