Trisha Good, Executive Director, Ohio Tuition Trust Authority
You’ve prepared for your children’s future by saving in a 529 plan for their education after high school. Now your child is considering different options after their graduation, and some may not include college. Don’t worry about your 529 account. You have many options for use of your savings.
Not just for four-year programs
First, keep in mind that 529 plans can be used at a wide variety of institutions. Not only can you use your 529 savings at four-year colleges and universities, but also at two-year community colleges, trade or vocational schools, apprenticeships approved by the U.S. Labor Department, and certificate or credential programs nationwide that accepts federal financial aid.
Hold on to the 529 plan
There is no deadline for when you must use the 529 account. So, if your child decides not to head to college right after their high school graduation, your 529 will be there when they are ready to start. Let’s say they want to use a gap year to explore different careers or work to earn money to pay for some college costs. Once they’re ready to start their higher education, you can make the tax-free withdrawals from your 529 account.
Transfer to a member of the family
What if your child decides that they will not pursue a education after high school so they won’t be using their 529 account? You still have options. You can transfer the account to another beneficiary. The new 529 beneficiary must be an eligible member of the family to your child. Since there are no time limits for using 529 plans, you could also hold onto the already established Ohio 529 account for your future grandchildren’s future college costs.
Pay for sibling’s qualified student loans
Does your child have siblings who went to college and have some student loans? 529 account owners can take a tax-free 529 withdrawal to pay principal and interest on qualified education loans for the original beneficiary of your 529 account as well as their siblings. The loan repayment provisions apply to repayments up to $10,000 per individual which is a lifetime amount. So, if one of your children won’t be using their 529 account, you can use it to pay off your other children’s qualified student loans.
Start a Roth IRA
Another 529 tax-free distribution allows any unused 529 funds to roll over to a Roth IRA for the same 529 beneficiary without incurring any penalty on the earnings. This way, you can use their higher education savings to give them a big jump-start on their retirement savings.
There are specific requirements to use this qualified distribution. First, a 529 account must be open for the beneficiary for 15 years. Second, the Roth IRA must be for the same beneficiary of the 529. Third, your contributions—also known as the principal—must have been in your Ohio 529 account for at least five years before the Roth IRA rollover. Fourth, you can only roll over 529 funds up to the yearly Roth IRA contribution limit. Fifth, the lifetime maximum 529 amount allowed for the Roth IRA rollover is $35,000. Before you elect to do a Roth IRA rollover, talk with your financial advisor or tax consultant.
Military academy exception
Does your child not need the funds saved in the 529 account because they will be attending an U.S. military academy? If so, then you can make a non-qualified withdrawal from their 529 account up to the estimated cost of attending the military academy without incurring the 10% federal tax penalty. The earning portion only of the withdrawal will be subject to federal, state, and local taxes.
Expenses for special-needs children and ABLE rollover
If your child may not head off for a higher education due to a medical or disability diagnosis, your 529 plan can still support them. Here are three options.
First, 529 plans cover certain expenses for a special needs students. The IRS Publication 970 “Tax Benefits for Education,” describes this as “expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school.” Therefore, if your child wants to go to college, then your 529 plan can also cover the additional services needed for their higher education.
Second, you can make a non-qualified withdrawal from the college savings plan based on your child’s disability as long it meets the IRS’ specific definition found on page 53 of the IRS Publication 970. It states, “A person is considered to be disabled if he or she shows proof that he or she can’t do any substantial gainful activity because of his or her physical or mental condition. A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration.” You can request a withdrawal, and 10% federal tax penalty will not be assessed. The earnings-only portion of the withdrawal will be subject to federal, state, and local taxes.
Third, 529 rollovers to an ABLE (Achieving a Better Life Experience) account are allowed without any penalty, as long as the account is for the same child or another member of your family. IRS Publication 907 “Tax Highlights for Persons With Disabilities,” further describes these changes, including the current total annual contribution limit of $19,000.
Non-qualified withdrawal
The final way you can use your 529 account is with a non-qualified withdrawal. This means that the earnings-only portion of the withdrawal will be taxed on the federal, state, and local level. There will also be a 10% federal tax penalty assessed for withdrawing money from the 529 plan for costs that aren’t considered qualified higher education expenses. As the 529 account owner, you can direct the non-qualified withdrawal to your child who is the 529 beneficiary. Before you elect to make a non-qualified withdrawal, first talk with your financial advisor or tax consultant to evaluate your options.
It is important to note that some states don’t consider all of these options qualified for state tax purposes so please talk with your financial or tax advisor before withdrawing or rolling over funds from your account.
About the author:
Trisha Good is the executive director of Ohio Tuition Trust Authority. Since 1989, Ohio Tuition Trust Authority has sponsored and administered Ohio 529 CollegeAdvantage. Ohio’s 529 Plan oversees nearly 683,000 accounts and over $20.23 billion in assets as of September 30, 2025. Visit CollegeAdvantage.com or call 1-800-AFFORD-IT (233-6734) for more information.