Key takeaways
- You can use a 529 plan for study abroad, but only at schools eligible for Title IV federal student aid.
- Qualified expenses include tuition, fees, book and room and board — but not travel, health insurance or daily living costs.
- Misusing funds can trigger income taxes and a 10 percent penalty.
- 529 plan withdrawals may be taxed by the host country, even if they’re tax-free in the U.S.
Yes – you can use a 529 plan to help pay for a study abroad program if the overseas institution is eligible for Title IV federal student aid, but using these funds internationally comes with strict rules. Not all schools or expenses qualify, and misusing the money could cost you in taxes and penalties.
Before you book your flight, be sure to confirm your study abroad program is hosted at an eligible institution under the Department of Education. Make sure the funds are only being used for qualified expenses, and you understand which expenses are not covered.
What are qualified education expenses for 529 plans?
A 529 plan allows you to save money for “qualified” education expenses. Generally, those include the normal costs of attending an educational institution.
Qualified expenses (covered)
To count as qualified, expenses must be required by the school and directly related to your enrollment. Eligible costs include:
- Tuition and fees
- Books, textbooks, supplies and equipment
- Room and board, if enrolled at least half-time
- Computers and internet access
Bankrate’s take:
If you’re living off-campus, your rent must fall within your school’s published room and board allowance. Save receipts in case of an audit.
Unqualified expenses (not covered)
Even if the following are necessary costs while studying abroad, they cannot be paid with 529 funds:
- International health insurance or medical costs
- Flights and transportation
- Basic living expenses (groceries, clothing, toiletries)
- Cell phone plans
- Sports and activity fees
If you use 529 funds to pay for these nonqualified expenses, the IRS will apply income tax to the withdrawals, as well as a 10 percent penalty on the earnings portion of the withdrawal.
Quick table summary of what a 529 plan does and doesn’t cover
| Covered by 529 | Not covered by 529 |
|---|---|
| Tuition and fees | Flights and transportation |
| Books and supplies | Health insurance |
| Room and board (must be part-time or full-time students) | Daily living expenses (groceries, clothing, toiletries, etc.) |
| Computers and internet | Cell phone bills |
| Sports and activity fees |
Tax credit limits
You can’t “double-dip” by claiming the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC) on the same expenses you pay with 529 funds. If you use 529 funds for expenses already covered by those credits, those withdrawals may become taxable.
How to withdraw funds from a 529 plan for study abroad
Here’s a step-by-step guide to make sure your withdrawal is tax-free and properly documented:
- Confirm school eligibility: Use the Federal School Code Search, which has the unique school codes assigned by the U.S. Department of Education to schools included in the Title IV federal student aid program.
- Get an official cost of attendance: Request a breakdown of qualified expenses from the school, including room and board limits.
- Calculate your qualified expenses: Only include tuition, fees, book and room and board. Exclude unqualified costs like travel or food.
- Withdraw only what’s needed: Request a distribution from your 529 plan administrator, specifying who receives the funds — either the student, the school or both.
- Keep detailed records: Save receipts, invoices and course requirement lists. You may need them if the IRS ever questions the withdrawal.
Should I use my 529 to study abroad?
Using a 529 plan to fund study abroad can make sense — but not always. Here’s what to consider.
Reasons to use a 529 plan
- Your school abroad is Title IV eligible.
- You’re earning a full degree or completing a semester abroad through a partner program.
- You want to avoid loans and already have funds saved in your 529.
- You’re using funds for tuition and qualified room and board, not daily expenses.
Reasons not to use a 529 plan
- You’re attending a school that isn’t Title IV eligible — your withdrawals will be taxed and penalized.
- Most of your expenses will be for travel, insurance or other unqualified costs.
- You’re participating in a short-term third-party program with hard-to-document expenses.
- You plan to take advantage of the AOTC or LLC tax credits and want to avoid overlap.
Does federal aid cover international study?
Yes – you can often use federal financial aid for international schools, but only if the institution participates in the Title IV program.
Eligible aid includes:
Bankrate’s take:
Graduate students may have different aid limits, but many federal programs are still available abroad. Always confirm with your school’s financial aid office.
Alternative ways to pay for study abroad
If a 529 plan won’t fully cover your costs or your school isn’t eligible, here are other ways to fund your experience:
Bottom line
Saving plans are one financial tool you can use to pay for study abroad programs and can be a useful way to cover the expenses of education overseas. Consider all costs, including taxes, when factoring your decision and determine if using a 529 plan to pay for your education makes sense for you.
If a 529 plan isn’t the best option, and you don’t have enough savings or free aid to cover your program, keep an eye on current student loan interest rates. Exhaust all federal options before turning to private ones.
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