What if the 529 beneficiary decides not to go to college?

If the beneficiary decides not to go to college, account owners have three options:

  1. Change the beneficiary on the account. An account owner can change the beneficiary at any time to another eligible member of the family of the beneficiary.
  2. Stay invested. College savings can continue to grow tax-free and be used in the event that the beneficiary starts college at a later date.
  3. Withdraw the money if it needs to be used for reasons other than paying for college expenses. If the withdrawal is not used for qualified higher education expenses, account earnings are subject to federal and state income taxes and are also typically subject to an additional 10% penalty tax. This penalty is waived if the beneficiary:
    • Dies (if the withdrawal is paid to the beneficiary’s estate);
    • Becomes disabled;
    • Receives a scholarship, so long as the withdrawal amount does not exceed the scholarship amount;
    • Attends a United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, so long as the amount of the withdrawal does not exceed the cost of education at the relevant institution; or
    • Used the funds from the withdrawal to claim certain education credits.


Was this article helpful?

For more information about the Wealthfront 529 College Savings Plan (the “Plan”), download the Plan Description and Participation Agreement or request one by calling
844-995-8437 or emailing Investment objectives, risks, charges, expenses, and other important information are included in the Plan Description and Participation Agreement; please read and consider it carefully before investing. An investment in the Plan is not insured or guaranteed by the FDIC or any federal or state government or agency. You could lose all or portion of your investment. Wealthfront Brokerage Corporation serves as the distributor and the underwriter of the Plan.

Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program

The Plan is administered by the Board of Trustees of the College Savings Plans of Nevada (the “Board”), chaired by the Nevada State Treasurer. Ascensus Broker Dealer Services, Inc. (“ABD”) serves as the Program Manager.

Earnings on nonqualified withdrawals are subject to federal income tax and may be subject to a 10 percent federal tax penalty, as well as state and local income taxes. The availability of tax and other benefits may be contingent on meeting other requirements.

The information contained is provided for general informational purposes, and should not be construed as investment advice. Nothing should be construed as tax advice, solicitation or offer, or recommendation, to buy or sell any security. Financial advisory services are only provided to investors who become Wealthfront clients. This article is not intended as tax advice, and Wealthfront does not represent in any manner that the tax consequences described here will be obtained or will result in any particular tax consequence.