As I understand pub 970, if the school is not an accredited institution, then nothing for education expenses (qualified or not) can be claimed.
Now as I read this post, they're not asking about deducting room and board expenses They're not deductible in this case anyway, for two reasons) They're only asking about waiving of the early withdrawal penalty for unqualified education expenses. Keep in mind that room and board is only a qualified expenses for 529 funds.
So wile it doesn't come out and state outright, I take that to mean that even an early withdrawal from a retirement account does not qualify for the penalty exception. (Though even if it does, you still pay taxes on the withdrawal. No way out of that.)
So I take the bottom line as no, you can not waive the early withdrawal penalty since the educational institution is not qualified. It's no different than asking if you can waive the penalty to use the money to pay your son's rent if he was working and did not attend school.
