Can You Use a 529 Plan to Pay Student Loans?
Student loan debt remains one of the biggest kinds of consumer debt in the country. Although people with education debt have been limited to exploring existing avenues for managing their loans, there is a little relief. Since the passing of the SECURE Act, 529 plan holders are able to withdraw up to $10,000 tax-free to put toward their own student loan debt, or that of their children, grandchildren, or spouses.13 As with any other financial product, it's a good idea to check with your plan administrator for full details on how this works.
- 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. This means a family with two children can take out a maximum of $20,000 to pay down their student loans. Secondly, plan holders cannot claim any student loan interest deductions paid with this money.
