Using Your 529 Savings to Study Abroad

As the cost of attending college increases across the United States and around the globe, how to pay for it remains a big concern. Many students and families who opened 529 plan accounts to fund their education here are discovering that the money can also be used to study abroad, if you follow the rules.

How a 529 Plan Works

A 529 plan is a tax-advantaged savings account for education. While traditionally used for college and other higher education costs, the plans can now be used for qualified K–12 expenses as well.

529 plans are administered by the states. While different states offer different funds—as well as varying tax deductions or credits—you don’t necessarily have to buy into a plan offered by the state where you reside. The majority of 529 savings plans have no state residency requirements, leaving you free to choose from a vast number of plans—although you are likely to forgo a state tax break for your contributions if you do.

While your contributions don’t entitle you to any immediate federal tax breaks, the money that your account earns will not be subject to federal income tax as long as you use your withdrawals for qualified education expenses, such as tuition, room and board, and mandatory fees.

How to Use 529 Savings to Study Abroad

Before putting down a deposit on an expensive study-abroad program, you may want to familiarize yourself with the rules regarding 529 plans and educational trips. Fortunately, the bulk of study-abroad expenses consists of tuition, fees, and room and board, which are eligible to be funded with 529 money just as they are in the United States. Required textbooks—which can be another significant expenditure—are also covered.

Note that for room and board to qualify, the 529 beneficiary must be at least a half-time student. And if the student chooses to live off campus, then their eligible room and board can’t exceed the school’s published cost of attendance estimate for those expenses.

A study-abroad program sponsored by your U.S. college or university will qualify for 529 funding if the U.S. school does. If you enroll in a foreign college or university, it may qualify as well, if it’s an eligible educational institution as defined by the U.S. Department of Education. You can find out by consulting the Federal School Code List. Many foreign colleges and universities are on the list.

In addition, as a result of the SECURE (Setting Every Community Up for Retirement Enhancement) Act, passed in 2019, 529 funds can now be used to pay back student loans (up to $10,000) and for eligible apprenticeships—both of which could be useful for those studying abroad.

Which Expenses Are Not Eligible?

Unfortunately, there are study-abroad costs that are not covered because they are not considered qualified expenses by the Internal Revenue Service (IRS). These include:

• The cost of traveling to and from the school, including airline tickets, train tickets, cab fares, etc.
• International health insurance or medical costs not covered by U.S. health insurance. (You can’t use your 529 to pay for U.S. health insurance, either.)
• Basic living expenses, which may be cheaper or more expensive than in the United States.
• Any costs associated with an international cellphone.
• Sports or other activities that are not part of the college curriculum. 

FAQs

The Bottom Line

The fantasy of studying abroad is often accompanied by sticker shock, as tuition and housing costs for these programs continue to rise. Fortunately, by using a 529 account—if you have one—you can save money on all of the expenses that qualify.