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529 and VA Education Benefits for Children

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  • 529 and VA Education Benefits for Children

    I've been recently assessed by the VA as a 100% Disabled Vet and my teenage children will be eligible for 48 months of in-state education tuition (Virginia).

    We have ~$80k in a 529 Plan and want to know how we can withdraw this money penalty free, since the kids will not be needing it.  I know it's penalty free for scholarships but the VA Education program for Dependents is not considered a scholarship.  I've seen some information that "Veterans Benefits" meets the criteria for penalty free withdrawals but I can't find anything that says they are not referring to a Vet using their GI Bill.

    Appreciate folks insight here.

    Cheers!

  • #2
    According the info on savingforcollege.com, they lump scholarship, veterans education benefits or other tax free payment of ed expenses that is eligible for title 4 federal student aid as exempt  (which includes tuition paid for by employer) from the 10% penalty.  You can always wait until you see what documentation you get from the VA that tax year when they start school because that is what you would need should you get audited to defend a non-qualified withdrawal penalty waiver when you take the money out at that time.

    https://www.savingforcollege.com/article/how-to-avoid-the-10-percent-tax-penalty-on-non-qualified-distributions

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    • #3
      What about grad school, or expenses that exceed the VA dependent benefit?

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      • #4


        What about grad school, or expenses that exceed the VA dependent benefit?
        Click to expand...


        also agree, generally the most expensive part of college is housing, not the tuition.

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        • #5
          Do you need to withdraw the money?  If not, save it for grandkids and it’ll have another 20+ years to grow tax free.

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