College Savings

A 529 College Savings Account Q&A

Learn if 529 plans can be used for graduate school, what to do with funds remaining after graduation, if each beneficiary needs a separate account, the maximum you can contribute each year, how the account affects financial aid, how grandparent-owned accounts work, and more.
Parents and daughter using tablet to learn how saving for college in a 529

A recent webinar about 529 college savings plans generated several questions from current and potential savers. We pulled out ten of these questions and wrote out our answers to help explain how 529 plans work. Read below to learn about maximum contributions, eligible schools, how to manage remaining funds, and more.

1. Can you use a 529 plan for graduate school?

Yes, savings in a 529 plan can be used for both undergraduate and graduate education. The funds can also be used for K-12 tuition (up to $10,000 annually), to pay back student loans (up to $10,000 in total), and for textbooks, fees, and equipment related to apprenticeship programs.

2. What do you do with 529 funds if some remain in the account after graduation?

You can save the funds for graduate education, or transfer them to another beneficiary in the family. If you decide to withdraw the funds to use for non-qualified education expenses, you'll have to pay taxes (and incur a 10% penalty) on the earnings. Another option is to roll the unused 529 funds into a Roth IRA for the beneficiary. Find out more details on that option here.

3. Is it ever too late to set up a 529 plan? I have three years before my child starts college.

It's never too late to start saving in a 529 plan. Even if you have a child close to graduating, you can open an account in which you can deposit graduation money and anything you can save over the summer before the child heads off to campus.

4. Do I need to have a separate 529 account for each beneficiary?

Yes, since a beneficiary is named on each 529 account, it's best to set one up for every child in the family.

5. What is the maximum amount that I can contribute to a 529 account in a given year?

The annual maximum that you can contribute to a 529 account without incurring the gift tax is $18,000.

6. How will my 529 savings affect financial aid?

A 529 account started by a parent will be counted as a parent asset on the beneficiary's financial aid applications. The good news is that the financial aid calculation only assumes that, at most, 5.6% of assets will be available to use for college costs. So most 529 accounts have a minimal effect on the financial aid eligibility of the student.

7. What are the advantages or disadvantages of a grandparent 529 account over a parent 529 account in terms of taxes or financial aid?

No matter the owner, savings in a 529 plan grow tax-deferred, and there are no taxes on withdrawals as long as they're used for qualified education expenses. As well, many states, Massachusetts included, provided a state tax deduction for saving in a 529 plan. In terms of financial aid, grandparent-owned 529 plans are no longer considered anywhere in the process. Parent-owned 529 plans are considered a parent asset and minimally affect financial aid eligibility. The financial aid calculation assumes that parents will need to contribute, at most, 5.6% of 529 account values toward college costs.

8. Can 529 plans be used for international education?

Yes, funds from a 529 account can be used for international colleges and universities that are eligible for Title IV federal student aid funds. You can find a list of those schools (each one has a federal school code) here.

9. Can one child have more than one 529 plan?

Yes, beneficiaries are permitted to have multiple 529 plans to their name.

10. Can a 529 plan of one state be used to pay for college expenses in another?

Absolutely. Savings in a 529 plan can be used to pay for qualified expenses for any college or university in the country, no matter the 529 plan's state of origin.

The Massachusetts 529 plan is called the U.Fund, and you can open an account online and begin saving immediately. Visit to learn more about the program and get started.

Learn more about the U.Fund