Can a 529 be used to pay student loans?

By Corey Buhay | Published on October 21, 2025

)

With one in five Americans carrying student debt, more people than ever are looking for creative ways to pay off their loans. Some are taking on side hustles or looking for employer assistance. But folks with college savings plans often wonder: Can you use a 529 to pay off student loans?

In 2022, the federal government passed an updated version of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The original version of the law made it possible to use 529 Plan withdrawals to cover student loan repayment costs. The updated legislation further expanded the ways 529 funds can be used. Here’s what you need to know.

What is a 529 Plan?

A 529 Plan is a tax-advantaged investment account families can use to build up their college savings. Students can open a 529 Plan on their own behalf, but it’s also common for parents and grandparents to start a college savings account for their child or grandchild. Unlike deposits to a traditional savings account — which have to be made after you’ve paid income taxes on the money — families can make deposits to 529 accounts tax-free.

The other perk of a 529 account is that you can also withdraw funds tax-free. As long as the money is being used to cover qualified higher education expenses, you won’t have to pay taxes on your investment earnings.

Distributions from a 529 Plan can be used to cover qualified K-12 and college expenses. These can include tuition, housing, textbooks, and more.

While you can’t deduct 529 contributions from your federal taxes, many states offer residents a full or partial tax deduction or credit on their state income tax. The state tax benefits depend on where you reside and where you open your 529 Plan.

The SECURE Act

Families with 529 Plans have always been able to use those funds for many qualified education expenses. But it wasn’t until 2020 that those funds also became eligible to cover student loan payments and interest, as well.

This first edition of the SECURE Act was signed into federal law in 2019 and went into effect in 2020. Most of this act had to do with making it easier for Americans to put aside money for retirement savings. But the act also allowed 529 account owners to use leftover funds to cover student loan repayment. Now, college students and graduates can use their 529 savings to cover up to $10,000 in student loans — plus $10,000 in loan costs for each of the beneficiary’s siblings.

Thanks to the SECURE Act, you can use your 529 savings on both private student loans and federal student loans. Borrowers can use the funds to cover both principal payments and student loan interest.

In 2022, the SECURE Act got another update. Most of the changes again affected workers’ access to retirement accounts. But the SECURE Act 2.0 also made it possible for families to move unused 529 funds to Roth IRA retirement accounts. So, if you have extra money in your 529 after covering your higher education costs, you can perform a tax-free rollover into a retirement savings account. Some small caveats: Rollovers are subject to annual contribution limits for Roth IRAs, and the lifetime limit for 529-to-Roth-IRA rollovers is $35,000. As always, please be sure to reach out to your tax advisor for guidance.

The new SECURE Act 2.0 also opens new possibilities for employer matching on student loan payments. That Can be a huge personal finance boost for borrowers who qualify.

Are There Any Restrictions to Using a 529 for Student Loan Debt?

The SECURE Act allows families to save after-tax dollars for college costs, but some states have more stringent 529 Plan limits. So, even if the IRS considers student loan repayment a qualified use for 529 Plan funds, your state may feel differently. Before using your 529 to make payments toward your student loans, it is important to review your own plan and see if your state has any restrictions.

Using Refinancing to Ease Student Loan Repayment

Thanks to the SECURE Act (and subsequent SECURE Act 2.0), families in many states can now use 529 Plan funds to cover both college expenses and student loan costs. The changes are poised to help account beneficiaries tackle their loan payments more aggressively and potentially get out of debt faster.

However, the truth is that not all student loan borrowers have enough 529 education savings to appreciably pay down their student loans. Fortunately, there are other options to help ease repayment. One of these tools is refinancing. When you refinance student loans with a private lender, you have the opportunity to extend your loan term, lower your monthly payment, or potentially get a lower interest rate if you meet certain eligibility requirements.

Want to see how much you could save? Check your rate with Earnest today. It only takes minutes, it’s completely free, and it won’t affect your credit score.

About the Author

Corey Buhay

Corey Buhay is a writer and editor based in Boulder, Colorado. She’s passionate about literature, the outdoors, and doing her taxes by hand. She has been writing about student loans and personal finance for Earnest since 2019. You’ll find her work in Outside Magazine, Backpacker Magazine, Smithsonian, and The Denver Post.

Disclaimer

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 As was announced by the U.S. Department of Education (ED), federal student loans have resumed accruing interest starting September 1, 2023, and federal student loan payments were reinstated starting in October. Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan. See https://studentaid.gov for more information.

2 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.