"It's less likely that someone would have excess 529 funds and a student loan balance, because it makes sense to spend funds before borrowing," Rogovy said in an email to The Independent.
I have recently written an article about alternatives to 529 plans that you might find useful: https://magnifina.com/articles/seven-alternatives-to-529-plans/
To answer your specific questions:
1. What limitations are there on how to use 529 funds?
529 funds must be spent on qualified education expenses. This isn't strictly limited to tuition. Room & board, study materials, and other fees qualify under specific rules.
2. What is the most popular thing to do with unused 529 funds?
We see many investors rolling the account over to another beneficiary. This is a relatively simple maneuver that preserves the benefits of the account.
3. What are one or two ways to use unused 529 funds that the average person may not think about?
One tactic to consider is using 529 funds to repay student loans (up to $10,000). It's less likely that someone would have excess 529 funds and a student loan balance, because it makes sense to spend funds before borrowing. But as mentioned above, some beneficiaries might receive unused 529 funds from someone else. Very rarely, some investors might believe the return on 529 investments could outperform the student loan interest rate.
4. What advice do you have for someone who has unused 529 funds but doesn't know what to do with them?
If you cannot immediately think about what to do with these funds, get in touch with a qualified financial advisor who can suggest some uses. Thinking creatively about money and investments is part of every advisor's job.
