Housing is an important part of planning for college costs. Therefore, the question of how parents can use college funds for off-campus housing is an important one.
Parents who are saving for their child’s college education can definitely use tax-advantaged 529 accounts for the cost of housing, up to a point.
According to U.S. News and World Report, 529 savings can be used for room and board up to the amount the institution they are attending budgets. (Most colleges provide the estimated cost of on-campus housing and meals as part of their informational package to prospective students and on their Web sites.)
The 529 can be used for either off-campus or on-campus housing as long as the student is enrolled at least half time.
Given that, parents should plan for housing costs as they save. How best to plan in a world where all costs for higher education are rising? U.S. News and World Report recommends researching the areas where your child plans to go to school. (Or areas you target, if a child is not yet old enough to plan.)
While college tuition and fees are often subject to large increases, housing prices in most places rise less dramatically. Still, it is wise to budget increases of 3%-5% per year for real estate.
Real estate costs vary dramatically by region and city, of course. If your child is attending school in one of the larger California cities like Los Angeles or San Francisco, for example, real estate costs will be quite high because housing prices in those cities are among the steepest in the nation. Conversely, housing prices in semi-rural areas of Midwestern states such as Nebraska and Kansas, which have large state universities, are comparatively cheap.
If your child will be attending school in a more expensive area for real estate, you can certainly save more than the budgeted price a 529 allows. However, the funds beyond what a given school estimates for housing will need to be placed in a separate savings account that is not a 529.
What about you—are you putting any savings plans towards your student’s housing?
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The information about how I can use a 529 account to put toward housing for my child’s education fund was really helpful. It’s good to know that some of the money in a 529 savings account can be put toward college housing up to the amount a university would budget. Paying for rent is a huge expense, so it’s great that I’ll be able to save money that will help my child afford to live off campus while he’s getting his degree. Thanks for the tips!