529 Plan FAQs
Find the answers to your questions related to 529 plans and college savings.
Do I have to use the money at a state school?
No, you can use your 529 plan account assets at eligible colleges and universities in the United States and eligible foreign institutions.
- What expenses can I use the money for?
Money withdrawn from the 529 plan account can be used for a wide range of qualified higher education expenses, such as room and board, tuition, books, and computer equipment. Refer to your enrollment kit for a full list of expenses covered by your state's plan.
- How and when can I take distributions from the account?
You can always withdraw money from your 529 plan account. However, non-qualified withdrawals are subject to federal income tax and a 10% federal penalty tax. There may also be state or local income tax, interest and dividends tax, or the equivalent. Qualified withdrawals include money used to pay for room and board, tuition, and books. You may NOT take loans against your 529 plan account.
You have several ways to withdraw money (take a distribution) from your Fidelity-managed 529 Plan account:
- Pay college bills online by enrolling now in Fidelity BillPay® for 529 accounts.
- Call a Fidelity representative at 800-544-1914.
- Complete the College Investing Plan Distribution form (PDF).
For money sent to the Beneficiary or directly to his/her school, a Form 1099-Q will go to the Beneficiary, who will be considered the recipient of the money for tax purposes. For all other withdrawals, the Participant will be considered to have received the money and will be sent a Form 1099-Q. Additional documentation (college invoice, statement, receipts) may be required by the IRS to verify that such payments are qualified.
- What if my child earns a scholarship?
You can withdraw the amount of the scholarship award from your 529 plan account without penalty; federal and state income taxes on the earnings still apply.
- Will investing in a 529 plan affect eligibility for financial aid?
529 assets may have a relatively small effect on federal financial aid eligibility because they are considered assets of the parent (Participant) in the Expected Family Contribution (EFC). Conversely, accounts that are considered assets of the child (Beneficiary), such as an UGMA/UTMA account, tend to have a greater affect on federal financial aid eligibility in the EFC calculation. See financial aid planning for more information.
- What is Fidelity BillPay® for 529 accounts?
Fidelity BillPay® for 529 accounts is a free online service that allows you to make single and recurring payments to colleges, tuition payment services, the account owner, or the beneficiary. To learn more, view the Fidelity BillPay for 529 Accounts demo. For questions regarding Fidelity BillPay for 529 accounts, please contact a Fidelity representative at 800-544-1914.
Enroll now in Fidelity BillPay for 529 accounts.
Note: Fidelity BillPay for 529 accounts is not intended for custodial UGMA/UTMA use.
- What do I need to know before paying college bills using Fidelity BillPay® for 529 accounts?
To facilitate bill payments to colleges, please include the following information when setting up the recipient of funds:
- The student ID or student account number from your tuition invoice
- The correct payment address, including any specific area or department name required by the school
When making your payment, bear in mind that the total market value of your account is based on the prior business day's market value of the portfolios in your 529 account. This market value may fluctuate between the time you enter your bill payment request and when the money is deducted from your account. If the payment request is not available due to a decrease in market value, you will be notified that your transaction was not accepted and you will need to re-submit your request. If you need to withdraw your entire account balance, please call a representative at 800-544-1914. Note: Payments will be deducted from your account on the withdrawal date.
For 529 accounts invested in multiple portfolios, the amount requested through Fidelity BillPay® for 529 accounts will be withdrawn from each portfolio held in your designated 529 account on a pro-rated basis. If you prefer to provide direction on the specific portfolio from which to deduct the requested amount, please call a representative at 800-544-1914 or fill out the College Investing Plan Distribution form (PDF).
Call a college savings representative800-544-2776
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1Bank Deposit Portfolio is not an eligible investment selection for Trust Account Registrations.
2Although the underlying deposits are eligible for FDIC insurance, subject to applicable federal deposit insurance limits, the units of the Bank Deposit Portfolio are not insured or guaranteed by the FDIC or any other government agency. You are responsible for monitoring the total amount of your assets on deposit at the depository bank, including amounts held directly at the depository bank. All such deposits held in the same ownership capacity at the depository bank are subject to aggregation and to the current FDIC insurance coverage limitation of $250,000. Please see your 529 Fact Kit for more details.
The asset allocation strategy you choose for any Custom Strategy should be based on your investment objectives, risk tolerance, time horizon, and other factors you determine to be important. Different asset allocations offer different balances between risk and potential returns. Generally, the greater the stock allocation, the greater the potential for long-term returns and the greater the risk of volatility, especially over the short term. Conversely, the greater the allocation to bonds and/or short-term investments, the lower the potential for high long-term returns but the lower the short-term risks.
The U.Fund College Investing Plan is offered by MEFA and managed by Fidelity Investments. If you or the designated beneficiary is not a Massachusetts resident, you may want to consider, before investing, whether your state or the beneficiary's home state offers its residents a plan with alternate state tax advantages or other benefits.
Units of the portfolios are municipal securities and may be subject to market volatility and fluctuation.
Please carefully consider each plan's investment objectives, risks, charges, and expenses before investing. For this and other information on any 529 college savings plan managed by Fidelity, contact Fidelity for a free Fact Kit, or view it online. Read it carefully before you invest or send money.
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