The reason why Turbotax is asking you about the loans is that you may withdraw up to $10,000 from their plan to pay down qualified student loans penalty-free—with conditions. The first is that the $10,000 maximum is a lifetime limit for a beneficiary and each sibling. Secondly, plan holders cannot claim any student loan interest deductions paid with this money. Turbo Tax is not assuming that you are using this money to pay down student loans, but if you are, then you would say yes to this question. This Turbo Tax link is a good illustration and provides clarification to this question.
When you pay for expenses, including tuition, books, computer equipment, and room and board, the school in which your beneficiary is enrolled issues a Form 1099-Q documenting the expenses. If you used the 529 to pay these types of expenses, then you will indicate this Turbo Tax.
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