August 3, 2017

WTOP Interview: What Expenses Qualify Under A 529 Plan?

LISTEN NOW! Keep our guide handy to know what you can use your college 529 funds for and what you can't.
Nina Mitchell, Principal, Senior Wealth Advisor & Co-President, Colony Sports & Entertainment

Interview Transcript

SHAWN: The ads for getting your college student ready to go off to school now in full swing.  They promote everything you'll need to outfit dorm rooms and apartments, from mini-fridges to computers. If you're a parent who saves money using 529 accounts, you'll be accessing those funds to pay for many college expenses, but there are some rules about what you can use the money for.

HILLARY: Joining us, Nina Mitchell, Senior Wealth Advisor and Partner at Her Wealth of Bridgewater Wealth in Bethesda at Bridgewater Wealth, great to see you Nina!

NINA: Great to be here, thank you.

HILLARY: So, tell us what types of expenses college students can use their 529 withdrawals for?

NINA: Well, with August right around the corner and college will be here before you know it. The top three qualified education expenses are pretty straightforward and include:

  • ‍First is tuition.
  • Second, room and board and both for on and off-campus housing. But the off-campus housing and meals can’t exceed the colleges' yearly allowable allowances. So, if you’re off-campus and it’s actually more than that, you need to pay that from none 529 funds.
  • And then the third cost is really technology; the laptops, software, printers, Internet service. The IRS has now recognized that technology costs are qualified expenses and it’s really a necessity for today’s college students.

SHAWN: Now here’s an interesting question, what are some of the expenses people think qualify, but really don’t?

NINA: This is where you need to be careful, because the following are not qualified expenses; transportation costs such as airfare and gas, you know when getting to school; student health insurance; club and activity fees including sorority and fraternity costs; student loan payments and then personal expenses such as cell phones, laundry and those midnight pizza rounds are definitely not 529 qualified expenses.

HILLARY: So, if a student has more than one 529 account, are there special considerations Nina about how they should handle those withdrawals?

NINA: Alright, since 529 plans under different ownerships will impact the financial aid that a student receives, it's really important to coordinate the timing of when you use the various 529 accounts. So basically 529 plans owned by a parent receives more favorable treatment on the FAFSFA, which is the federal student aid application than 529 plans owned by a grandparent. And so, in order to maximize your eligible federal student loan amounts each year, it’s better to take withdraws from a 529 owned by a parent first in the early years and then use your grandparents 529 for the later years of college and grad school as well.

SHAWN: Alright Nina, timely stuff, thanks so much.

NINA: Thank you.

SHAWN: Nina Mitchell with Bridgewater Wealth in Bethesda and for more, go to search Her Wealth.


Shawn: Now you hear all kinds of deals about leasing cars, how can you negotiate a better deal if you want to lease?

Nina: Okay, well many people don't realize that they can actually negotiate the sticker price on a leased car in the same way that you would do that if you're buying a car. And since when you lease -- when you're, you know, your lease payments basically cover the depreciation, the difference between the sales price and the residual value. So it's definitely in your best interest to try to reduce that sales price as much as possible because then you'll pay you know, smaller dollars over the life of the lease. Make sure you pay attention to the down payment at the lease signing. And so here's an example, you might see an ad that says you know, lease payment is only 1.99 a month and that sounds like a great deal for thirty six months. The catch is, is that it might require a $3,600 down payment. So, if you amortize the down payment, then actually that 1.99 special, becomes 2.99. So, you really have to kind of look at total costs. 

And then lastly, dealerships use the term, money or lease factor, when they're calculating your financing costs and a lease factor is not the same as an interest rate. So, you have to make sure the dealer converts that lease factor into a comparable interest rate so you know what your financing charges are. 

Shawn: At the end of the day, does one method wind up being more expensive more often than the other, or can we tell that?

Nina: You know what, it really depends on how long, if you're going to hold the car for a long time, you're better off buying. But if you know, and if you're not, if you just really enjoy driving and you want to have a new car, then go ahead and lease. I mean, there's pros and cons to both, to be honest with you, it's not one size fits all.

Shawn: Alright Nina, great. Happy Thanksgiving to you. Alright, Nina Mitchell is with The Colony Group, for more go to and search Her Wealth.

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Nina Mitchell, Principal, Senior Wealth Advisor & Co-President, Colony Sports & Entertainment

With over 25 years of finance, tax and investment advisory experience, Nina advises an elite group of professional athletes, executives and high net worth individuals. She is a driving force behind Her Wealth, Colony's initiative to empower women with financial knowledge, resources and confidence.