Imagine contributing to a 529 plan for your child for the last decade, but when it’s time to send in college applications, your son or daughter tells you they don’t want to go.

It’s not as uncommon as you may think. But now you’re suddenly confronted with having to figure out what to do with the money you’ve invested in the college savings plan. Rest assured, there are still plenty of ways to make the most of an unused 529 plan.

A 529 Plan Isn’t Limited to a 4-Year College Education

College isn’t for everyone, but it’s important to talk to your child about the importance of furthering their education, regardless of the field it’s in or what kind of school they get if from. Luckily, your child’s 529 plan isn’t limited to an education at a four-year institution.

For example, if your child decides they want to be an HVAC technician, automotive mechanic or a hair stylist, the courses and certifications they need to do those jobs (and possibly any advanced training) could also be covered by their 529 plans. You could also potentially use 529 funds to pay for your child’s private K-12 education, if applicable.

Transfer the 529 Plan to Another Beneficiary

If you don’t think you’ll need your savings, or you won’t need all your savings for a certain child, you can easily transfer that 529 plan to another qualifying beneficiary in the family without tax consequences.

For instance, if you have another child attending college or a niece or nephew that needs help with a private K-12 education, you can transfer the 529 plan to list them as a beneficiary to pay for their education. Keep in mind, you can transfer a 529 plan to any child, niece, nephew, grandchild or other close relative for any of the approved education-related expenses. However, try to avoid skipping a generation, as that could trigger a tax penalty.

Naming Yourself as a 529 Plan Beneficiary

Since 529 plans can also be used to pay for continuing education, you could use it yourself. If you have any interest in going to school or going back for an advanced degree, you can name yourself the beneficiary and use the 529 plan for the costs associated with registering for classes, buying books and, in some situations, even paying for housing.

Plus, with a more-advanced degree comes the chance for higher earnings, which could end up benefiting your entire family.

SECURE Act 529 Plan Distribution Options

Do you have other children that went to college and ended up with student loans? Signed into law at the end of 2019, the SECURE Act now permits 529s to be used to repay student loan debt. Parents can withdraw up to $10,000 per 529 plan beneficiary over their lifetime to repay student loans. This offers additional planning opportunities by expanding what qualifies for a tax-free distribution for 529 plans.

Another 529 plan change included in the SECURE Act allows for tax-free 529 plan distributions to pay for registered apprenticeship programs if the program is registered and certified with the Department of Labor. Eligible program expenses include fees, books, supplies, or required equipment.

Withdraw for Other Uses, but Pay a Penalty

If none of these options seem to make sense for you, you can still use the money for other things. However, as with any investment account, you’ll pay a penalty for taking out that money for something outside of its intended use. In the case of the 529 plan, that’s a 10% penalty on withdrawals, and it means you’ll have to pay ordinary income tax rates on any earnings in the account.

This is far from the ideal situation, so be sure to talk to your financial advisor before making any changes to your 529 plan. With careful planning and the help of your advisor, it’s possible for your whole family to see the benefits of a 529 savings plan.


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 benefits that are only available for investments in such state’s qualified tuition program.

Margaret Beggs Towle

Margaret Beggs Towle

Senior Vice President, Financial Advisor

CPA, Series 7 Securities Registration,1 Series 66 Advisory Registration,†              Insurance License With more than 18 years of experience in estate and financial planning, Margaret has been adding her expertise to the St. Croix Valley team since 2004. As a Certified Public Accountant, she holds a Bachelor of Science degree in Accounting. Margaret is constantly working to implement effective financial strategies for each and...Read More