The federal SECURE Act of 2019 *allows* states to make student loan payments a qualifying expense for their 529 plans, but it does not *require* states to do so. Some states have done this and some have not. So it depends on which state’s plan you’re invested in.
For states that do allow loan payments as a qualifying expense, there is a limit — $10,000 per beneficiary *lifetime*. So your daughter’s plan may not be the best strategy, even if loan payments are allowed.
For states which don’t allow loan payments (or for amounts above $10K lifetime in states that do), you *can* use the 529 funds anyway, but it would be a non-qualifying withdrawal subject to tax, penalty fees, and recapture of state tax benefits.
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Maybe.
The federal SECURE Act of 2019 *allows* states to make student loan payments a qualifying expense for their 529 plans, but it does not *require* states to do so. Some states have done this and some have not. So it depends on which state’s plan you’re invested in.
For states that do allow loan payments as a qualifying expense, there is a limit — $10,000 per beneficiary *lifetime*. So your daughter’s plan may not be the best strategy, even if loan payments are allowed.
For states which don’t allow loan payments (or for amounts above $10K lifetime in states that do), you *can* use the 529 funds anyway, but it would be a non-qualifying withdrawal subject to tax, penalty fees, and recapture of state tax benefits.
More reading: https://www.reddit.com/r/StudentLoans/comments/1mq6pzr/possible_to_payoff_student_loans_using_529/n8osmvo/