Parents and guardians—the 2024-25 school year is here. Before your rising sophomores, juniors and even seniors jump into the mayhem of classes, test prep, and extracurricular activities, carve out some family time for discussions to help your teens plan for their higher education options.

These conversations should include realistic talk about all potentials, including:

• College in-state or out-of-state
• A four-year university or a community college 
• A public or private institution 
• Trade school  
• Apprenticeship program

Your talks should cover not only what you and your kids want but also what you can afford to spend, whether they qualify for academic scholarships or need-based financial aid, and whether you or they are willing to fund their education through federal student loans, currently charging 6.5% interest rates. 

As you help your teens work through their options, also take stock of your financial situation. Has the family saved for their education, and will your teen qualify for academic scholarships, Pell Grants, or Federal Student Financial Aid? If you’ve been saving for their education through a tax-advantaged 529 account, you’ve made a good start, and there still may be time to save more before they complete high school, and even after.

Sit down and have a discussion with your teen about what the family can contribute to their future education. Having this discussion early, in their sophomore or junior year, can help set expectations as they make choices around which colleges to apply to. 
 

A detailed checklist is an invaluable way to ensure that you’ve investigated all funding options and that you’re following instructions for applications, withdrawals, and other forms of paperwork to the letter. 

In addition to funds from a 529 plan, viable college funding opportunities often include: 

Federal Student Financial Aid. By filling out the FAFSA, your teen may qualify for multiple forms of financial aid that cover all or part of their expenses for college and even graduate studies. 

Pell Grants. Unlike a loan, federal Pell Grants don’t have to be repaid, except under certain circumstances. To qualify for a Pell Grant, a student must demonstrate financial need through the Free Application for Federal Student Financial Aid (FAFSA®) form. Visit the federal student aid website for FAFSA forms, guidelines, and all-important deadlines.
 

With a 529 education savings account, you can withdraw from the beneficiary’s account for qualified education expenses when needed. Withdrawals must be for “qualified education expenses.” So be sure to keep records of qualified education expenses to support withdrawals made. 

Also, avoid “double dipping” by properly reconciling any federal tax credits such as credits from the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLTC).  Before making your 529 withdrawal, ensure that the expense has not already been paid for with another source, including:

• Scholarships 
• Pell Grants
• Employer or veteran’s educational assistance 

When you are ready to make a 529 withdrawal, you may submit a withdrawal request by logging into your account online or filling out this form. Stay on top of deadlines for the most important items like tuition, as there may be temporary withdrawal restrictions, and check with your child’s institution to see if you can make automatic payments from the 529 account directly to the school. The Education Plan can send a check to the institution, to the account beneficiary, or to the account owner. It’s your decision.

Finally, the correct timing of your withdrawals is significant. Make sure you withdraw and spend the money withdrawn in the same calendar year, not academic year! Otherwise, your withdrawals, even for qualified education expenses, may be subject to tax and penalties.
 

It may seem tedious, but it’s worth the effort. Remind yourself to maintain documents that support spending from the 529 account for the required time period, in case the IRS asks for proof of your qualified withdrawals. This means keeping detailed records that include account statements with tuition and room and board; receipts for computer equipment, accessories, software, and internet; syllabi documenting course requirements (e.g., lab fees); canceled checks and records showing withdrawals for all qualified education expenses. 

Some of this may seem confusing, but it can be as simple as four steps:

1. Total up your expenses
2. Avoid including any expenses already paid by other sources
3. Make the appropriate withdrawals for qualified education expenses
4. Keep records of your spending

As you go through the process, develop your checklist, and document your steps, remember, we’re here to help. If you can’t find the answers you’re looking for on our website, reach out with any questions about how to make a withdrawal here.