Covering Room and Board Expenses in College with Your 529 Plan
By Andrew Murphy, CFA | Co-Chief Investment Officer & Francesca Lanza | Associate Portfolio Manager
When families plan for the costs of college, they often overlook a significant expense: room and board. After tuition, room and board can be the second-largest component of a student’s college bill. Fortunately, using a 529 plan is an effective way to cover these expenses. It’s important to understand the guidelines and criteria involved to make the most of your savings.
The Cost of Room and Board
According to data from the College Board for the 2022-23 academic year, the average room and board costs at public 4-year colleges were approximately $12,310, while private institutions averaged around $14,030. These costs are expected to rise annually, so families can anticipate expenses of $84,000 to $96,000 over four years at a college or university.
Qualified Expenses and Requirements
A 529 college savings plan provides a tax-advantaged method for saving and paying for higher education expenses, including tuition, books, supplies, and room and board. To qualify, room and board expenses must be incurred during an academic period when the student is enrolled at least half-time in an eligible educational program. This includes various on-campus and off-campus housing options, as well as approved study abroad programs.
Using Your 529 Plan Effectively
For on-campus housing, you can allocate funds directly from your 529 plan to cover housing costs and meal plans.
Off-campus housing expenses can also be paid for using a 529 plan, up to the school’s cost of attendance. This can include rent, groceries, and utilities.
It’s important to be aware of the room and board allowance specified in the college’s official cost of attendance to ensure you don’t exceed eligible expenses.
Ensuring Eligibility and Compliance
When using a 529 plan to pay for room and board, it’s crucial to meet certain criteria:
The student must be enrolled at least half-time in an eligible institution.
Expenses must be related to the period of enrollment in a degree, certificate, or recognized credential program.
Any expenses beyond the college’s specified allowance may result in non-qualified distributions, which could be subject to taxes and penalties.
Planning Ahead for College Costs
With the rising costs of room and board, understanding how to leverage your 529 plan effectively can greatly alleviate the financial burden of college. By staying informed about qualified expenses and requirements, families can make informed decisions to maximize their savings and ensure a smoother college financing journey.
DISCLOSURES
Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Winthrop Wealth, a Registered Investment Advisor and separate entity from LPL Financial.
< COMMENTARY
Perspectives, Updates | July 19, 2024
Covering Room and Board Expenses in College with Your 529 Plan
By Andrew Murphy, CFA | Co-Chief Investment Officer & Francesca Lanza | Associate Portfolio Manager
When families plan for the costs of college, they often overlook a significant expense: room and board. After tuition, room and board can be the second-largest component of a student’s college bill. Fortunately, using a 529 plan is an effective way to cover these expenses. It’s important to understand the guidelines and criteria involved to make the most of your savings.
The Cost of Room and Board
According to data from the College Board for the 2022-23 academic year, the average room and board costs at public 4-year colleges were approximately $12,310, while private institutions averaged around $14,030. These costs are expected to rise annually, so families can anticipate expenses of $84,000 to $96,000 over four years at a college or university.
Qualified Expenses and Requirements
A 529 college savings plan provides a tax-advantaged method for saving and paying for higher education expenses, including tuition, books, supplies, and room and board. To qualify, room and board expenses must be incurred during an academic period when the student is enrolled at least half-time in an eligible educational program. This includes various on-campus and off-campus housing options, as well as approved study abroad programs.
Using Your 529 Plan Effectively
For on-campus housing, you can allocate funds directly from your 529 plan to cover housing costs and meal plans.
Off-campus housing expenses can also be paid for using a 529 plan, up to the school’s cost of attendance. This can include rent, groceries, and utilities.
It’s important to be aware of the room and board allowance specified in the college’s official cost of attendance to ensure you don’t exceed eligible expenses.
Ensuring Eligibility and Compliance
When using a 529 plan to pay for room and board, it’s crucial to meet certain criteria:
Planning Ahead for College Costs
With the rising costs of room and board, understanding how to leverage your 529 plan effectively can greatly alleviate the financial burden of college. By staying informed about qualified expenses and requirements, families can make informed decisions to maximize their savings and ensure a smoother college financing journey.
DISCLOSURES
Prior to investing in a 529 Plan, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state’s qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Winthrop Wealth, a Registered Investment Advisor and separate entity from LPL Financial.