529 Flexibility | American Funds

When your child doesn't need a 529 education savings plan after all.

Life is full of surprises. Whether your child earned a full scholarship to the college of his choice or opted to become a full-time artist instead, your 529 savings plan is still a valuable investment. Maybe the money won’t be used as you originally intended, but you can still benefit from the flexible options available to you.

Young people in a non-college setting

Key takeaways

  • Be assured that the money you've saved is all yours, no matter what.
  • Look for other ways to use the assets in your 529 savings plan.
  • Consider transferring the account to another beneficiary.

Life lessons.

Congratulations on putting aside a chunk of money for your child's education. Sometimes life doesn't go exactly as planned and your child chooses a different path. That's okay too. The money you've saved in your 529 savings plan will be put to good use.

Your money, your choice.

You’re willing to put a bit of money aside so that college will be within reach for your child. But what if she's on a different page and won’t need that 529 savings plan for college after all? Rest assured that the money you save in a 529 savings plan is always yours and always accessible. In fact, the flexibility of the plan is one of its greatest benefits.

Pursue another path.

The money in a 529 savings plan isn’t limited to four-year universities. Community colleges, seminaries, trade schools … any path your child chooses that involves professional training likely is eligible for a 529 savings plan. Find a full list of accredited choices on the FAFSA website.

And keep in mind that you can use the funds for more than just tuition and training. Related supplies and equipment — from textbooks to laptops — are qualified expenses.

Change beneficiaries.

One of the best perks of a 529 savings plan is that you have the option of transferring the account to another beneficiary. The new beneficiary can use those funds for all the same educational expenses — including room and board, tuition and books. You might consider rolling this account into a sibling’s 529 savings plan, for instance.

You can change the beneficiary at any time, as long as he or she is a member of the family of the previous beneficiary. Get this: A member of the family generally includes the beneficiary’s descendants, the beneficiary's brothers, sisters, parents, uncles, aunts, in-laws, spouses — even first cousins. And you can be a beneficiary, too.

Take the cash.

Keep in mind that as long as the money is used for a qualified education expense, it is tax-free. If used for something else, you’ll pay income taxes on any gains, as well as a 10% early withdrawal penalty. (If that dream scholarship comes through, you are allowed to withdraw the amount of that scholarship with no penalty.)

The amount you originally invested (the principal) will never be taxed, but withdrawing the gains will trigger additional costs. You’ll want to consider your options and carefully craft a strategy that lets you keep as much of your money as possible.

Use it for primary education.

The assets in a 529 savings plan can be used for tuition at private K-12 schools (up to $10,000 a year). Perhaps a younger child can take advantage of the money you saved. Or if you know for a fact that your child isn’t interested in pursuing higher education, you can possibly start spending even before high school graduation. Note that not all states include K-12 tuition as a 529 savings plan qualified expense for state tax purposes.

Leave it alone.

If your child isn’t college-bound today, it doesn’t mean they won’t change their mind later. Your 529 savings plan account can continue to grow tax-free for decades to come, so there’s no rush to make any changes.


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. 

If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. State tax treatment of K-12 withdrawals varies. Please consult your tax advisor for state-specific details.

American Funds Distributors, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.