Quote:
Originally Posted by disneysteve
Does that mean the 529 money doesn't actually have to be used for educational expenses as long as there actually were educational expenses equal to the amount withdrawn? For example, could my kid borrow $5,000 for school and then I take $5,000 out of the 529 and use it to take a cruise?
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Okay, now you are making me think!
It seems it would be okay, since everything I see is that it is okay to pull the money out for educational expenses, even if a loan is used to pay for them.
I think the point is, you have to pay the loan eventually. So it doesn't really matter what you do with the money until the loan is paid.
I think the issue in your scenario is that is the student holds the loan, and the student is the beneficiary of the 529, no, I don't think the parent can go on the cruise. If the parent holds the loan, and is responsible for paying it off, then yes, the parents can use it for whatever they want. That is my gut feel. You can't stick the kids with the loans, and then withdraw the money for your pleasure - that is not the intent anyway.
I don't think this comes up much at all. Most people "pay as they go" with a 529 plan. Thus, there isn't much professional discussion on the topic, that I can see. But yes - a good question.