July 21, 2021

Can You Use A 529 Account To Pay Student Loans?

Chipper Help

Student loans have become one of the biggest consumer debt types in the country. On average, college students will each incur $37,500 in debt to finish their tertiary education. This predicament concerns about 42.9 million Americans.

Because of the struggles associated with paying this debt, many professionals wonder if they can use a 529 account to pay student loans. The answer is: yes, you can. Let’s go through the conditions surrounding this new development.

What Is a 529 Account?

In the 1990s, US senators created the 529 plan to help individuals pay for higher education. The tax-advantaged savings plan enables borrowers to grow their money for a beneficiary, typically a child, grandchild, or spouse.

Each state, including the District of Columbia, offers at least one type of 529 plan. Below are the two types of 529 plans, each with tax advantages designed to help individuals save up for college expenses.

  • Prepaid tuition plans: These plans allow consumers to purchase college units for future use at any participating organization. Most of these plans allow users to prepay tuition at current prices, beating inflation. In most cases, the state backs these plans.
  • Savings plans: These plans enable consumers to open accounts for stock and bond investments. Most plans choose conservative options as the beneficiary becomes of age. Unlike prepaid tuition plans, the state doesn’t back college savings plans.

529 Plan Adjustments

Since the account’s inception, the government has applied several changes that will benefit individuals with student loans. Let’s look at three such adjustments: H.R. 529, Tax Cuts and Jobs Act (TCJA), and Setting Every Community Up for Retirement Enhancement (SECURE).

H.R. 529

Congress members Lynn Jenkins and Ron Kind initiated H.R. 529, also known as the ABLE Account Improvement Act of 2017. The goal of the bill was to encourage business owners to contribute to employees’ 529 plans through tax incentives.

The government simplified processes for employers who wanted to add to their workers’ 529 plans. For one, they provided tax credits to small businesses that made plan contributions to shoulder administrative costs.

Additionally, the legislation removed conditions that penalized taxpayers who used their funds to pay off student loans. Currently, individuals who use their plans for nonqualified expenses receive a 10% federal tax penalty.


In 2017, President Donald Trump signed the TCJA into law, which increased the benefits of 529 plans for individuals. Initially, a taxpayer could only use a 529 account for post-secondary education. However, the TCJA allowed individuals to use $10,000 from their 529 plans annually for elementary or secondary school expenses, including public, private, and religious schools.

Some states also allow deductions against state income tax for 529 plans. For example, New Yorkers with 529 accounts may reduce state income up to $10,000 annually, leading to more than $1,000 in savings.


In 2019, President Donald Trump approved the SECURE Act, another law that improved 529 account benefits. Below are some of the changes the government implemented under the new law:

  • Taxpayers can now use their 529 plans to cover apprenticeship program expenses such as books, equipment, and supplies.
  • Now, account holders can withdraw up to $10,000 to pay specific student loans but with conditions. First, there is a $10,000 lifetime limit for a beneficiary and each sibling. Secondly, they cannot claim student loan interest from this amount.

The Verdict

Can you use a 529 account to pay student loans? Yes, you can. However, there are rules on using it for your beneficiaries. Like with any financial product, it’s best to do your research and ask an expert how it works.

Use Chipper for Lower Payments

Chipper can help you find a student loan repayment plan that actually fits into your budget. You simply fill out your information and link your student loan account for us to generate your options in seconds. We help the average student loan borrower save over $300 a month off their student loan monthly payment. Lowering your monthly payment plan can game changing for your personal finance and can be done in minutes! Sign up for Chipper today to get on track with your student loans.

Use Chipper for The Best Path to Forgiveness

Finding your path to student loan forgiveness is easier than ever before. Chipper helps members find better Income-Driven Repayment (IDR) plans every day. Once enrolled in an eligible repayment plan, we can help you explore your forgiveness options and understand your path towards forgiveness. Sign up with Chipper today and get on track with your student loans.

Use Chipper for Round-Ups

Paying off your student loans doesn’t have to be a long and painful journey. Round-Ups are a way to directly pay off your loans with your everyday spending! By tracking your linked spending account(s), we will calculate the rounded up amount from each transaction in a week (IE spending $4.28 would add $0.72 to the weekly amount). We then initiate a payment towards your student loan for the weekly amount. Get chipping away on your student loans with Chipper today.

Use Chipper for Public Service Loan Forgiveness (PSLF)

The Public Service Loan Forgiveness (PSLF) program was created to provide relief to borrowers aiding the public sector. Unfortunately, 30% of applicants are denied due to incorrect paperwork. We can help! Chipper was created to solve this issue by assisting borrowers in understanding their options as well as allowing forgiveness eligible users enroll into the best forgiveness program available. Sign up for Chipper today to see your student loan forgiveness options and get the forgiveness you deserve.

Use Chipper for Teacher Loan Forgiveness (TLF)

The Teacher Loan Forgiveness (TLF) program was created to enable teachers working in Title 1 schools to receive student loan forgiveness of up to $17,500 (depending on their teaching subject). Chipper has helped teachers from all over the country qualify for TLF program and can help you get the forgiveness you deserve today. Find out if you qualify for forgiveness in minutes with our employer search tool.

Don't worry.
Be Chipper.
Get Started