09/15/2026
A college scholarship is exciting news — but if you’ve been saving in a 529 plan, it may leave you wondering what to do with those funds.
The good news? A scholarship doesn’t necessarily mean your 529 savings go to waste.
Depending on your situation and applicable rules, you may have several options, including keeping the account invested for future qualified education expenses, changing the beneficiary to another eligible family member, withdrawing funds up to the amount of the scholarship without the additional 10% federal tax penalty, or potentially transferring eligible funds to a Roth IRA if IRS requirements are satisfied.
There isn’t one solution that works for every family. Your goals, tax considerations, and broader financial plan can all play a role in determining what makes sense for you.
Before making a move, take the time to understand your options and how they may fit into your long-term financial strategy.
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing. Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state’s 529 Plan.
