Fee payment deadlines have a tricky way of sneaking up on you. Every semester, 529 plan service centers receive frantic calls from parents and students trying to expedite a withdrawal from their 529 account. Granted, while this last-minute rush is stressful, it’s still far better than not having any savings to draw from.
This situation is completely avoidable. While transferring funds from a 529 account to a student’s university account isn’t an instant process, the transfer can happen relatively quickly in most cases. To keep your semester on track, please heed this guidance when you need to take a withdrawal this fall!
Generally, there are four ways to request a withdrawal from a 529 plan, and they can usually be initiated online or by phone. (Note: Your plan may offer additional options. Also note: It is generally advisable for tax purposes to select the student as the payee.)
– Send a check to your address of record: The funds are mailed directly to you, and you pay the school.
– Transfer the funds to your bank account on file: Funds are sent electronically to your bank.
– Send a check to the school’s accounts payable address: The 529 plan mails a check directly to the school. Important: You’ll need to provide the 529 plan with the school’s name and address, the student’s name and student’s ID.
– Electronic transfer (ACH) to the school: Funds are sent directly to the school electronically. Again, ensure the name of the school and the student ID are attached to this request.
As a rule of thumb, request your withdrawal at least 10 business days before the fee payment deadline. However, you should add extra time to your buffer if:
– A check is being mailed to you or the school.
– You are linking a new bank account to your 529 plan (in some cases, safety holds can prevent withdrawals for up to 15 days after linking).
Pro Tip: Consider sending funds directly to the school via electronic options like ACH or other services offered by your plan. While some plans charge a small fee for faster electronic service or overnight express check shipping, it may be worth it to avoid late charges.
What Happens if You Miss the Deadline?
The consequences of missing a fee payment deadline can range from costly late fees to being dropped from your classes for non-payment. Trust me, there is nothing fun about paying extra penalties or losing your seat in a required course!
If you realize you won’t make the deadline:
1. Contact the school immediately: Call the business office or accounts payable department and ask if they offer a temporary deferred payment plan.
2. Use a backup payment method: Pay the amount out of pocket from a personal bank account or credit card to bridge the gap (just be aware that universities often charge a convenience fee for credit cards), then reimburse yourself from the 529 later.
The takeaway: Save the date, schedule your withdrawal at least 10 business days in advance, and follow up with the university to confirm the funds were successfully applied to the account.
Pay your fees on time so your student can get down to the real business of being a student!
About the author:
Lael M. Oldmixon, M.Ed., is the Executive Director of the Education Trust of Alaska, which offers Alaska’s three 529 plans, Alaska 529, the T. Rowe Price College Savings Plan, and the John Hancock Freedom 529 Plan. She lives in Alaska with her spouse, two children, and two dogs.
As I travel around my home state of South Carolina, I see families preparing to celebrate the 250th anniversary of the signing of the Declaration of Independence. Their many patriotic displays show they understand that the ideals put forth and adopted on July 4, 1776, are foundational to the individual liberties we enjoy today. As Americans, we appreciate freedom in every aspect of our daily lives and value the control it gives us.
Even families saving for their children’s future education want the freedom to choose how they use their money. That’s why many families save with a 529 plan. Today’s 529 plans offer account owners who are saving for education more flexibility than ever before. Below are some of the key freedoms that 529 account owners and their beneficiaries can enjoy.
FREEdom in how it’s used
You probably know that 529 funds may be used for tuition, but they’re also available to be used for many more educational expenses. Whether your child will be living in an on-campus student dorm or in an off-campus apartment, you’re able to use 529 funds to pay for qualified housing as well as student meals. In addition, 529 money may be used to pay for books, software, computers, supplies, and any equipment required to complete coursework.
Tax-FREE
Few investment vehicles allow you to invest money and grow it tax-free, but 529 plans do. Earnings from your contributions are tax-free and compounded. Through compounding, any gains your account earns have the opportunity to make more gains – all tax-free.
And when your child is ready to use their 529 funds, you’re allowed to withdraw the money tax-free, as long as the funds are being used to pay for qualified education expenses.
FREEdom in where it’s used
You can’t predict what your child’s dreams and goals will be, so 529 plans provide the flexibility to use your funds at a variety of educational institutions. You may use funds at any accredited two-year or four-year public or private college, university, technical college, trade school, graduate school program, professional program, or apprenticeship across the United States and in many foreign countries. You may also use funds for professional licensing fees or certificates. You may even use 529 money to pay for up to $20,000 per year of qualified expenses at a public, private, or religious K-12 school.
529 FREEdom equals control
Your 529 funds are always your money, and you have options that keep you in control of any leftover funds in your account.
Transfer the funds. If you have unused 529 funds, you can transfer them to another family member or use them yourself if you plan to continue your education. You may also transfer 529 funds to use for a grandchild’s education.
Pay student loans. You may use up to $10,000 of leftover 529 funds to pay off the student loan debt of the beneficiary, their sibling, or another family member. Perhaps one of your children attended a more affordable school, but your other child chose to pursue an advanced degree that required a student loan. This option could be the perfect solution.
Rollover the funds. You can use your 529 funds for the beneficiary’s retirement. If your 529 account has been open for at least 15 years and the funds have been invested in the account for at least five years, you may be able to roll over up to a maximum lifetime limit of $35,000 to a Roth IRA that is owned by the designated beneficiary.
Withdraw the funds. You may withdraw your money at any time, even for non-qualified educational expenses. Withdrawals for non-qualified expenses are subject to a 10% federal penalty as well as income tax, but only on the earnings portion of the withdrawal – not on the money you originally contributed. If your child receives a scholarship, you may withdraw up to the amount of the scholarship without penalty and pay taxes only on your earnings. We encourage you to consult a tax professional for more information about non-qualified withdrawals and any applicable penalty waivers.
FREEdom from student loan debtAs a State Treasurer, I know how important it is for families to understand that they have the power to help their children avoid significant student loan debt. 529 plans are designed to make saving for education as simple as possible so that you can help put your child on the path toward a successful, unburdened financial future. By opening a 529 account early and contributing as often as possible, you increase your account’s earning potential to fuel your child’s education journey.
About the author: Curtis Loftis is the State Treasurer of South Carolina. He also serves as the administrator of South Carolina’s Future Scholar 529 College Savings Plan. Visit treasurer.sc.gov or futurescholar.com for more information on ways to save through a 529 plan.
I spent this past weekend attending graduation parties for recent high school graduates and mingling with parents who, in a few short months, will be sending their first children off to college. As parents, we spend so much time in the preparation — putting away savings in 529 plans during elementary school for what seems at the time like a distant future, followed by years of supporting our children through the gauntlet of qualifying for, applying to, and selecting a college — that when graduation day finally arrives, we feel like we’re done! The reality, however, is … well, not quite yet.
Your student very likely already has the university-provided checklist well in hand, covering housing, orientation enrollment, class selection, and — most importantly — identifying cool roommates. Let them run with that. But dear parent, heed some well-worn advice on practical, parental to-dos to cover with your student over the summer before you leave them on move-in day:
Talk about money. If your student has never managed a budget, this is a perfect time to learn. Define your financial boundaries and responsibilities for school-year expenses. Determine who will pay tuition and housing bills, and discuss what constitutes “core” versus “discretionary” spending, as well as how your student will supplement expenses beyond a possible base allowance — perhaps by getting a campus job.
My own experience involved saving to cover tuition and housing expenses through 529 plans, and, beyond that, providing each of my sons with a year’s budget funded at the start of the academic year, meant to last the entire year — anything above and beyond was funded out of their own pockets.
Discuss a FERPA waiver. The Family Educational Rights and Privacy Act (FERPA) is a federal law enacted in 1974 that protects the privacy of student education records. It requires your student’s prior written consent before a university may disclose grades, transcripts, class schedules, and financial aid records to you. In other words, information you had unlimited access to when your student was in high school is no longer available to you once they reach college — without their explicit consent. FERPA waivers are available through the college or university and may even be signable online. Importantly, a FERPA waiver allows the student to selectively choose what types of information to share with their parents — it is not a blanket waiver — so your student retains meaningful control.
Have your student sign a HIPAA release form and a health care proxy. Once your student turns 18, they are legally recognized as an adult, and health care providers are bound by federal privacy laws under HIPAA, which prevent them from disclosing medical records or acting on your direction during an emergency without explicit legal authorization. A student who wants a parent to have access to medical records, lab results, and treatment plans must grant that authorization by signing a Health Insurance Portability and Accountability Act (HIPAA) release form. Additionally, if a student becomes incapacitated, a health care proxy must be in place for a parent to have standing to make medical decisions. These two steps are best taken when you are not already in a medical or emergency crisis.
Talk about mental health. The transition out of the home and into the independence of college life can be both emotional and stress-inducing. Normalize this possibility, and find out what academic, health, and mental health support services are available at your student’s school — where they are located and what they provide. Being familiar with these services in advance may help your student address academic or personal challenges before they escalate. Many students are reluctant to seek help because they fear it signals that they are struggling or unable to handle their responsibilities; knowing where to turn ahead of time lowers that barrier.
I experienced this firsthand when my son, who attended a university four hours from home, needed support services. I was relieved to have had a health care proxy in place, which allowed me to help him find the services he needed. Through that experience, he learned how to advocate for himself and navigate the system to get the help he deserved.
I call this the business of launching your student into college life. Taking care of these items in advance gives you, as a parent, genuine peace of mind — and gives your student the single-minded focus they need to embrace their new adventure, grow into adulthood, and create the lasting memories that college is all about.
About the Author:
Vivian Tsai is Managing Director and Head of Relationship Management for TIAA-CREF Tuition Financing, Inc. (TFI), a wholly owned subsidiary of TIAA. TFI operates as the 529 Plan Program Manager for the States of California, Colorado, Georgia, Illinois, Kansas, Michigan, Minnesota, Oklahoma, Washington and Wisconsin. She resides in California having parented her sons through California State Polytechnic University in San Luis Obispo and the University of California at Berkeley.