Mary Hunt

Dear Mary: We’ve been putting money in a 529 savings plan for our daughter’s college education for the past several years. She recently told us she wants to attend beauty school instead. Now that the surprise has worn off, we’re concerned about penalties when we withdraw the money. How much will we lose, and is there any way to avoid it?

— Rebecca

Dear Rebecca: I’ve got great news for you! That 529 plan money can be used at any accredited trade or vocational school — not only at colleges and universities — to pay for tuition, room and board, fees, books and supplies. If you have more in the account than the total cost of the vocational training and related costs, you can withdraw the balance.

Federal law imposes a 10% penalty on earnings for nonqualified distributions. This means that you will get back 100% of your principal and 90% of your earnings.

Another option is to change the beneficiary to another child or qualifying family member to keep the account going and avoid (or at least delay) taking nonqualified withdrawals. Your particular fund may have additional provisions, so be sure to check with the fund manager.

You can learn more about 529 college savings plans at

Load comments