How to Use Your 529 Plan to Pay for Studying Abroad

Studying abroad is becoming a more popular option for students looking to expand their horizons. Here are some tips for using your 529 Plan to pay for an overseas education.

Several of my clients have shared that their grandchildren are preparing to study abroad this coming school year, including colleges and universities in the United Kingdom, Italy, and Ireland. The conversations during these client meetings have stirred great memories for me about my own time studying abroad while attending King’s College in Northeastern Pennsylvania (not King’s College at Cambridge). I spent a semester living and studying in London, and it was one of the great experiences of my life.

Today, there are even more opportunities and options to study abroad than I had. Most colleges offer programs where students can spend a single semester or an entire school year studying at a foreign university, while still enrolled in their domestic school. Another option allows students to enroll in a foreign college or university fulltime.

What Your 529 Plan Can Be Used For

Whether studying domestically or abroad, the cost of a college education continues to rise to the tune of more than three times the annual rate of inflation over the last 20-years. The total cost of a four-year domestic education averages between $120,000-$200,000, depending on the type of institution you attend (private or public). This cost includes tuition and fees, books and supplies, room and board, and transportation. The cost of studying at an international university can vary greatly, depending on the country, but is generally slightly less expensive than a U.S. education.

One of the most common vehicles being used to save for and fund college costs is the 529 Savings Plan, which is a tax-advantaged investment vehicle designed to encourage people to save for future higher education expenses. Contributions to the plan are invested, and the earnings growth within the account is tax-free when used to pay for qualified education expenses for the designated beneficiary.

Distributions from 529 Plans can be used tax-free to study abroad. There are restrictions, however. Similar to the rules for domestic college studies, the distribution must be used for qualified higher education expenses at an eligible institution. The key words there being “eligible institution.” Eligible institutions are colleges and universities that are eligible for Title IV federal student aid.

Tuition, fees, books, supplies and equipment, and room and board (if enrolled at least half-time) are considered qualified expenses. Transportation and travel-related expenses, basic living expenses, and health insurance are not considered qualified expenses.

How to Learn if You Can Use Your 529 Plan

The U.S. Department of Education maintains a list of international schools that participate in Federal Student Aid Programs. You can find this list at I reviewed the list and interestingly, King’s College (which is part of the University of Cambridge), is an eligible institution. If only I had known the rules back then.

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