12 Jul Can 529 plan pay for SAT classes and college consultants?

Q. My son was a junior in high school last year and took the SAT. I paid for him to take an SAT prep course that lasted eight weeks. Can I pay for it with money from his 529 plan? I also hired a college consultant to assist my son with his college application process and college essays. Can I use his 529 money to pay for that?
— Dad

A. There can be a lot of expenses when it comes to preparing for college.

But 529 plans are meant for actual college expenses, not for the prep work.

College application and testing fees are not considered higher qualified education expenses for the purpose of 529 withdrawals, said Marnie Hards, a certified financial planner with Aznar Financial Advisors in Morris Plains.

Same goes for the SAT class.

If you do pay for them with money from his 529 plan, there would be taxes and penalties on this withdrawal, she said.

College consultants are not considered qualified education expenses, either, Hards said.

“So you could take money out of the 529 plan to pay for these expenses, but keep in mind that the distribution would be subject to income taxes and a 10% penalty,” she said.

The following is a list of educational expenses and their qualification status.

You also cannot use the 529 funds for transportation and travel costs for getting to and from campus, such as airfare or gas, health insurance or fees for extracurricular activities, she said.

Qualified education expenses include enrollment fees, tuition up to the full amount of college or vocational school tuition, certain room and board fees for on-campus living if the student is enrolled at least half-time, and certain rent, food and utility bills if the student lives off-campus, she said.

It also includes K-12 tuition up to $10,000 per calendar year, special needs expenses for college, computers, software and internet access for college and qualified education loan payments, subject to a lifetime maximum of $10,000 per designated beneficiary or sibling of designated beneficiary, she said.

Good luck to you and your student.

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This story was originally published on July 12, 2022.

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