For all its benefits, studying abroad often comes at a higher price tag than one semester at home. You may be trying to figure out how to pay for your child's education overseas if they plan to study there.How To Use 529 Funds To Pay for Studying Abroad? is one option for covering the cost. Your contributions to these tax-deferred investment accounts may be used to pay for qualifying educational expenditures, such as tuition at an approved foreign school. Learn how to make the most of these funds while studying abroad. The rising expense of higher education is a major issue for families throughout the United States and the world. After opening a 529 plan account to pay for a domestic education, numerous students and their families are surprised to learn that the funds may be utilized for international education if certain conditions are met.
Using A 529 Plan To Pay For International Education
A 529 plan is a tax-advantaged savings vehicle that may be used to pay for qualifying educational expenditures at certain schools and institutions. Expenses like these are generally covered:
- Cost of Education
- Hardware and software for computers
- Meals and lodgings
- Textbooks
Using a 529 plan to pay for college tuition expenses outside of the United States is subject to the same regulations that govern doing so in the United States. Withdrawals from 529 plans are not subject to federal income tax if they are utilized to cover qualifying study abroad costs at an institution that is also qualified to participate in federal student assistance programs. The U.S. Department of Education has a database of approved foreign universities and colleges for federal financial assistance. The FAFSA may be used to apply for federal education loans to help cover the expense of studying abroad.
What Your 529 Plan Will Cover And What It Won't Cover
Which costs, therefore, may be reimbursed? The same topics would be taught within your home school, as described above. Most importantly, several expenses cannot be paid using funds from a Section 529 plan. Some of the items on that list are:
- traveling to and from the host nation or institution
- Insurance coverage for medical care in a foreign country or expenses spent while receiving medical treatment abroad
- The use of a global cellular system
- Expenses for basic subsistence above what is given by the host institution
- Sports and extracurricular activities are not included in the regular tuition.
Should You Use Money From A 529 Plan To Cover Study Abroad Costs?
Examining the financial implications of studying in a different country is the first step in answering this crucial issue. It all comes down to these three factors that will determine the price:
- Where the host institution is situated
- Exactly who is funding this venture?
- Time spent here
When participating in a study abroad program coordinated by your home institution, you may expect to spend the same amount on tuition, fees, and living expenses at the host institution as you would at your home university. Another thing to think about is registering via a third-party source rather than directly with the host institution. To receive federal student assistance, you must verify that the host institution meets the necessary criteria. If not, you won't be able to utilize your 529 plan as a tax-free exit since independent study abroad providers don't have their federal school code. A 529 plan may be used to pay for external programs.
The Best Ways To Reduce The Cost Of Studying Abroad
Make sure to get down with some numbers before leaving to see if there is any way you can save costs on your study abroad trip. Examine your credit card's rewards history to determine whether you have enough miles or points to purchase their airfare. If you don't already have an airline credit card, one tactic to consider is opening one well before your trip and charging purchases to get bonus points or miles. You might put the points toward their plane ticket. Always pay your bill in full to avoid interest fees that might eat away at your money.
Conclusion
With few exceptions, using a 529 plan withdrawal to finance an international education is a tax-free option. The disbursement must be utilized to cover Qualifying Higher School Expenses at even a Qualified Educational Organization. Schools of higher education that meet the requirements for Description IV federal student funding are among those that qualify as "authorized educational establishments." The cost of studying abroad is one possible barrier to what may be an eye-opening collegiate experience.
