College Refund Due To COVID-19? Here’s How To Handle It

Your college student may have received a refund for tuition, fees, room and board, or other qualified higher education expenses due to COVID-19.

If you withdrew funds from your student’s 529 account to pay the expenses, you may be able to deposit the refund back to the 529 account.

To put the funds back into the account, your recontributions:

  • must not exceed the amount refunded
  • must be deposited into a 529 account for the same beneficiary
  • must occur within 60 days of the refund date

If you don’t recontribute the funds to the 529 account, or otherwise use them for qualified expenses, the refund will count as a non-qualified withdrawal potentially subject to tax and penalties.

Here’s another important 529 tip for covering upcoming expenses, given the changes resulting from the coronavirus pandemic:

If your college student incurs remote learning expenses as part of the summer or fall semester, you can still use your 529 funds as long as your student is enrolled in an eligible educational institution. In addition to the normal tuition and fees, eligible higher education expenses for remote learning include computers, software, related equipment and internet access, as well as room and board costs in select circumstances. Contact your college or 529 custodian with questions about your specific situation.

The Takeaway:  Despite the pandemic, a 529 plan is still one of the very best and most tax-efficient ways for people to save for college and higher education expenses, and plans are flexible in responding to today’s changing circumstances.

About Mari Adam

Mari Adam, Certified Financial Planner™ has been helping individuals and families chart their financial futures for over twenty-five years. Have a question about your financial situation? Ask Mari!

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