529 rules apply to many foreign schools

12/31/2007

QUESTION:
Dear Joe,

If I open a 529 college savings plan for our grandchildren, will they be able to use the funds to attend non-U.S. colleges? They have dual U.S. and Canadian citizenship and may wish to attend Canadian universities.
-- Peter

ANSWER:
Dear Peter,

Plenty of foreign institutions of higher education, including more than 100 Canadian schools, are eligible under the rules permitting tax-free withdrawals from a 529 plan.

To check for eligible schools, visit Savingforcollege.com for a Federal School Code Lookup. You can enter a search query for a particular school or view a list of schools in a particular state.

In the state drop-down box, you can select "Foreign Country" to view schools in other countries, or narrow it down a bit by selecting a country such as Canada or Mexico.

The test for any particular school's inclusion is its eligibility to participate in Title IV federal financial aid programs. Most degree-granting four-year schools, junior and community colleges, and graduate schools will qualify, as will many proprietary and vocational schools.

The U.S. Department of Education assigns a school code to approved institutions. Wondering about a particular school not found on the school code listing? Call the school's administrative office and ask whether students there can apply for federal financial aid. If the answer is yes, find out the school's code.

A small number of schools that may be eligible under Title IV choose not to participate in the federal aid system and will not have a school code.

In such instances, ask whether the school has received a determination from the IRS granting eligible status and permitting students at the school to take tax-free distributions from their 529 plans.

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