What happens to unused 529 funds?
If your child doesn't use all their 529 savings for college, the money doesn't disappear. Depending on your situation, you may be able to use it for other qualified education, change the beneficiary, pay student loans, roll eligible funds into a Roth IRA or make a withdrawal.
Options for unused 529 funds
Here's a quick look at what your options may be for unused funds in a 529 education savings plan and what to know about each one.
For a general overview of how these accounts work, see how a 529 plan works.
Use 529 funds for other qualified education
A child not going to college doesn't necessarily mean the savings can’t be used towards education expenses. Qualified education covers much more than a traditional four-year university. Eligible uses may include:
- Trade and vocational schools: Programs like cosmetology, culinary arts or automotive technology may qualify.
- Two-year programs: Community college and associate degree programs are generally eligible.
- Graduate and other post-secondary education: Funds can be applied toward further education down the road.
- Registered apprenticeship programs: Certain registered programs qualify as eligible education expenses.
- Postsecondary credentialing programs: Certain qualified programs and their related expenses may be eligible.
- K-12 expenses: Certain elementary and secondary school expenses may qualify, including tuition, curriculum and instructional materials, tutoring, certain testing and dual-enrollment fees. For 2026, qualified elementary and secondary school expenses are subject to a federal aggregate limit of up to $20,000 per beneficiary per year across the beneficiary's 529 plans. State treatment varies.
Change the beneficiary to a qualifying family member
If the original beneficiary doesn't end up using the funds, you can generally change the designated beneficiary to another qualifying family member. Examples may include:
- A sibling
- A parent
- A grandchild
- The account owner, if eligible under the applicable family-member rules
Changing the beneficiary to a family member in the same generation, such as a sibling, is generally tax-free and penalty-free. Changing to a beneficiary in a lower generation, such as a grandchild, may have gift tax implications. State tax treatment can also vary. A qualified tax professional can help you understand what applies to your situation.
Roll eligible funds into a Roth IRA
Under rules established by the SECURE 2.0 Act, qualifying unused 529 funds may be rolled over directly into a Roth IRA for the 529 beneficiary. For families that have saved more than their child ends up needing, this can be a meaningful way to redirect those funds toward retirement savings.
Key rules to know before considering this option:
- Lifetime limit: The rollover is capped at $35,000 per beneficiary.
- Account-age requirement: The 529 account must meet a 15-year account-age requirement before funds can be rolled over.
- Five-year rule: Contributions made in the last five years and their related earnings are not eligible.
- Annual IRA contribution limits: The rollover counts toward the applicable annual IRA contribution limit. For 2026, the general limit is $7,500, subject to applicable rules.
- Compensation requirement: The beneficiary must meet applicable earned income requirements for a Roth IRA.
Because the annual limit applies, the full $35,000 can't be moved in a single year. Rollovers typically need to be spread across multiple years.
Use 529 funds to pay up to $10K in student loans
Certain 529 funds may be applied toward qualifying student loan repayments. Under federal rules, there's a lifetime limit of $10,000 per individual. This can apply to the designated beneficiary and, under federal rules, certain siblings.
When used for a qualified student loan repayment, the earnings portion of the distribution is generally not subject to federal income tax.
Keep the 529 funds invested for now
Not ready to decide? An immediate decision may not be necessary. 529 accounts don't expire, and the funds can stay in the account while you consider your options.
If funds remain invested, keep in mind that earnings depend on the investment options chosen and market conditions. A State Farm Registered agent can help you think through your options for education savings.
Take a nonqualified withdrawal
529 funds can be withdrawn for purposes that don't qualify as education expenses. It's worth understanding the tax implications before making this choice.
The contribution portion of a nonqualified withdrawal is generally returned without additional tax. The earnings portion, however, may be subject to federal income tax, an additional 10% federal tax, and state and local taxes.
There are circumstances in which the additional 10% federal tax may not apply. These can include certain situations involving a scholarship, attendance at a U.S. military academy, death or disability. State tax treatment may also differ from federal rules.
Frequently asked questions about unused 529 funds
Can unused 529 funds be rolled into an Achieving a Better Life Experience (ABLE) account?
Potentially. Eligible beneficiaries may be able to roll 529 funds into an ABLE account for themselves or a qualifying family member. The rollover counts toward applicable ABLE contribution limits, so check the current rules and the ABLE program before moving the funds.
Can you split a 529 between siblings?
You may be able to use 529 funds for more than one child by changing the beneficiary or moving part of the money to another 529 account for a qualifying family member. Federal rules generally allow beneficiary changes and certain rollovers between 529 accounts without federal income tax consequences when the new beneficiary is a qualifying family member. Check your plan’s rules before making a change.
Can I use unused 529 funds for myself?
Possibly. If you qualify as a family member of the current beneficiary under federal rules, you may be able to make yourself the new beneficiary and use the 529 funds for your own qualified education expenses. Plan rules and individual tax circumstances can vary.
Can I use 529 funds to buy a laptop?
Yes, in some cases. Computers, related equipment and internet access may qualify as 529 education expenses when they are used primarily by the beneficiary while enrolled at an eligible educational institution. The expense must meet applicable IRS requirements.
Can I use 529 funds to buy a car or a house?
A car or home purchase generally isn’t considered a qualified 529 education expense. You can take a nonqualified distribution from a 529, but the earnings portion may be subject to federal income tax and an additional 10% federal tax unless an exception applies.
This content was developed with the help of AI and reviewed by State Farm editors.
The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
Before investing in a 529 plan, consider the plans investment objectives, risks, charges, and expenses. Contact the plan issuer for an official statement containing this and other information. Read it carefully.
Neither State Farm nor its agents provide tax or legal advice.
Investors should consider before investing whether their or their beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program and should consult their tax advisor, attorney and/or other advisor regarding their specific legal, investment or tax situation.
Qualified higher education expenses generally include tuition, fees, books, supplies, and equipment required for enrollment or attendance; certain room and board expenses incurred by students who are enrolled at least half-time; the purchase of computer or peripheral equipment, computer software, or Internet access and related services, if used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution; certain expenses for special needs services needed by a special needs beneficiary; apprenticeship program expenses; payment of principal or interest on any qualified education loan of the beneficiary or a sibling of the beneficiary (up to an aggregate lifetime limit of $10,000 per individual); K–12 Expenses; and Qualified Post-Secondary Credentialing Expenses.
Securities are not FDIC insured, are not bank guaranteed and are subject to investment risk, including possible loss of principal.
If the account owner dies before the end of the five-year period, a prorated portion of the contribution will be included in his or her taxable estate. If you contribute less than the $95,000 maximum, additional contributions can be made without incurring federal gift taxes, up to a prorated level of $19,000 per year. Federal gift taxation may result if a contribution exceeds the available annual gift tax exclusion amount remaining for a beneficiary in the year of the contribution.
AP2026/09/1495
