5 Things You Didn't Know About 529 Plans (But Should!)

Surprising facts that make these college savings plans more flexible—and powerful—than you think.

Over nearly 20 years of helping families plan for their children’s education, I’ve seen firsthand how 529 plans can open doors—not just for college, but for financial flexibility. And while most people know the basics (like the tax-free growth for qualified education expenses), there are some hidden features that make 529 plans even more valuable.

Here are five lesser-known things you might not know about 529s:

1. You’re not limited to your state’s plan.
One of the most common assumptions I hear is, “I thought I had to use my home state’s 529.” Not true! You can shop around and compare plans nationwide. Some states offer better investment options, lower fees, or added tax advantages. In fact, I’ve helped several clients choose out-of-state plans that aligned more closely with their goals.

2. You can change beneficiaries (and shift funds) pretty easily.
Life doesn’t always go as planned—especially when it comes to college. If one child decides not to attend, or gets a scholarship, you can change the beneficiary to another eligible family member, like a sibling, niece, nephew, or even yourself. One client of mine ended up using leftover funds to pursue a master’s degree later in life!

3. Qualified education expenses go way beyond tuition.
529 funds can be used for room and board, books, laptops, and even internet access if it’s required for school. I’ve had clients pleasantly surprised that off-campus housing could qualify—as long as it falls within the school’s cost of attendance.

4. The new SECURE 2.0 Act gives you more flexibility with unused funds.
This is big: Starting in 2024, you can roll up to $35,000 of unused 529 funds into a Roth IRA for the same beneficiary (as long as the account has been open for 15+ years and meets a few other conditions). One family I work with is using this new rule to help their son—who didn’t end up using all his college funds—start his retirement savings early. That’s a powerful pivot.

5. The impact on financial aid is smaller than you think.
Another common worry: “Won’t this hurt my child’s FAFSA eligibility?” 529s are considered parental assets, and only a small portion (typically 5.64%) is factored into aid calculations—much less than other types of savings in the student’s name.

Wrapping it Up
529 plans have evolved into flexible, strategic tools that go far beyond tuition payments. Whether you’re just getting started or rethinking your approach, understanding the full potential of a 529 can help you feel confident about how you’re investing in your child’s future.

Want help making sure your 529 plan is set up the right way—or looking for ways to put leftover funds to work? I’m just a message away.

Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors.

As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover education costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. The tax implications can vary significantly from state to state.