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How To Pay Tax-Free Rent for Off-Campus College Living

June 18th, 2012 · No Comments · Student Loans

by Staff

recite-1t1nmffAt a time when student loan debt is weighing heavier on Americans than our credit cards (for the first time in history), coupled with it being cheaper to buy than rent in most U.S. metro areas,  college students renting off-campus may find financial relief for housing via 529 Plans.

A 529 Plan is an education savings plan, also known as a “qualified tuition plan.” It allows parents and their children to save tax-free money for college. Withdrawals are always free of federal tax, and usually state tax as well, provided the money does, indeed, go toward school. If and when money is withdrawn for other purposes, both federal and state taxes do apply.

In addition to covering the cost of tuition and on-campus living expenses, 529 Plans may be used to cover the cost of off-campus living as well, including rent, utilities, and other relevant expenses. The only stipulation seems to be that the student must be enrolled in a degree program at least half-time.

There are two types of 529 Plans. As defined by the U.S. Securities and Exchange Commission:

1) Pre-paid tuition plans generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board.

2) College savings plans generally permit a college saver (also called the “account holder”) to establish an account for a student (the “beneficiary”) for the purpose of paying the beneficiary’s eligible college expenses.

If you are looking to learn all the ins-and-outs of paying for a college education, also refer to our comprehensive article on student loans.

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