529 Accounts Can Now be Used to Pay Back Your Loans
There are plenty of restrictions on how you can use the funds from your child’s 529 account. If you don’t follow the rules, you can find yourself paying a 10% penalty and taxes on the earnings of the withdrawn funds. Not good, and something you really want to avoid.
Up until now, you could not use your child’s 529 funds to pay off any portion of a student loan. But now, you are able to use up to $10,000 to pay off a student loan. One caveat. You cannot use your 529 account funds to pay off a federal student loan, as in the Direct Loan (For students) that the government offers to anyone who fulfills the filing rules.
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