Hi,
My child (age 23) is considering attending a top foreign fashion institute for 4 years, but it is not listed on the Department of Education’s list of participating schools for financial aid. I've saved into a Coverdell and a 529 for years, and now I read that to make a deduction from a Coverdell to pay for tuition, the school must be on the list.
Is this true?
If so, what are our options to use the Coverdell money to pay for expenses there? Does the restriction only apply to tuition, or can we at least pay for the expenses related to the school (materials, rent, food, etc)? The school's tuition is low enough that we would not need any financial aid, and we actually have enough saved in the Coverdell to pay all four years of tuition and expenses.
It's always been the plan to avoid financial aid and rely solely on the Coverdell, and now it seems like if we tap it -- even to pay legit higher educational expenses -- we will either have penalties or taxes, or both. We won't have a 1098-T, but I heard that is not needed even for a US school (is this true also?).
Does it help if we transfer the account to a 529 plan? (i.e., are the rules the same for those accounts?)
Any help to navigate this issue or to help us understand penalties/taxes, etc is greatly appreciated.
It seems a shame to have saved so diligently and not be able to use the money as intended.
