A 529 plan may be used to pay for the beneficiary’s graduate school or professional school education. A distribution to pay for qualified higher education expenses at a graduate school or professional school will be considered a qualified distribution and therefore tax-free.
Which Graduate and Professional Schools Are Eligible?
Eligible educational institutions include any college or university that is eligible for Title IV federal student aid. This includes most graduate schools and professional schools in the U.S., as well as some foreign institutions. This includes medical schools, law schools and business schools. All graduate and professional degrees are eligible, including Master’s degrees (e.g., MSW, MBA, MA, and MS), doctoral degrees (e.g., PhD, and EdD), medical degrees (e.g., MD, DO, DVM and PharmD), and law degrees (e.g., JD and LLB).
To determine whether a graduate or professional school is an eligible institution, look for the school’s Federal School Code on its web site. Note that graduate and professional schools often have a different Federal School Code than the undergraduate institution. You can also use the Federal School Code Lookup tool on Savingforcollege.com.
Which Expenses Are Eligible?
Qualified higher education expenses at a graduate or professional school are the same as at an undergraduate school. The qualified higher education expenses include:
- Tuition and fees, books, supplies and equipment required for enrollment or attendance of the beneficiary at the graduate or professional school
- Special needs expenses
- Expenses for the purchase of a computer (including peripheral equipment, software and internet access)
- Room and board, if the student is enrolled on at least a half-time basis
When Do Families Use 529 Plans for Graduate or Professional School?
Most often, a 529 plan is used to pay for graduate or professional school when there is leftover money from the beneficiary’s undergraduate education. It is better, however, for the family to set up a 529 plan just for graduate or professional school after the student has graduated from undergraduate school. The time horizon for graduate school differs from the time horizon for undergraduate school. Also, depending on the account owner, a 529 plan for graduate school may count as an asset on the student's undergraduate school financial aid application forms.
Sometimes, a child decides to not go to college. The parent can change the beneficiary to themselves and use the money to pay for their own graduate or professional school education.
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