Dual enrollment allows you to earn college credit while you’re still in high school. Doing so can help you save money on the total cost of your education while preparing you for a more rigorous course load once you start college.
A 529 plan can be used for dual enrollment but there are some things you should be mindful of before you withdraw funds from your account.
What Is A 529 Plan?
A 529 plan is a type of tax-advantaged savings account that helps families save for future educational expenses. This includes tuition, books, a new computer, or room and board at a four-year university. A 529 plan can also be used for other types of educational expenses like going to trade school or taking continuing education classes after you graduate.
There are two types of 529 plans to choose from:
- Prepaid tuition plans: allows families to lock in in-state tuition rates at eligible institutions
- Education savings plans: an investment account that allows families to set aside savings and grow it tax-free for future educational expenses
Unlike other investment accounts, 529 plans don’t have an official contribution limit. They follow the same guidelines as gifting. In 2025, you can save $19,000 in a 529 plan to avoid tax implications. There’s also an option to fund up to five years’ worth of contributions at once or $95,000. Plans vary by state and have different tax benefits for in-state contributors and minimum account requirements.
What Is Dual Enrollment?
Dual enrollment allows high school students to take college-level courses while in high school. Unlike Advanced Placement, which allows students to earn college credit while in high school, dual enrollment allows high schoolers to enroll directly at a local college.
Dual enrollment is a cost savings strategy for students who want to knock out college credits while they’re still in high school. Enrollment at a community college will allow you to earn credits at a much lower rate than a four-year university and by earning these credits ahead of time, it will reduce the amount of time you spend in college, lowering your total college bill.
Aside from cost savings, dual enrollment can also help students get ready for college. By doing college-level courses ahead of time, students can build confidence while gaining experience taking more rigorous classes.
Can A 529 Plan Be Used For Dual Enrollment?
A 529 plan can be used for qualified educational expenses including dual enrollment. This includes tuition fees as well as textbooks and course materials at a qualified college.
For an expense to qualify, it must be related to education and offered at an accredited institution. While AP classes are similar to dual enrollment, you can’t pay for the test fees from a 529 plan. You also can’t use a 529 plan for non-qualified expenses including transportation to and from campus or participating in extracurricular activities.
Each state sets their own requirements for how 529 plan funds can be used. If funds are withdrawn and used for an expense that is considered non-qualified, it could result in taxes and a 10% penalty. To stay in compliance, it’s important to keep receipts and maintain detailed records of funds used to cover eligible expenses.
Related: 529 Plans By State
How To Use A 529 Plan To Pay For Dual Enrollment Expenses
Before enrolling in a dual enrollment program, make sure the program is eligible. Check to make sure the institution is accredited and verify what rules you need to follow based on the state you live in.
Once you’ve confirmed that you can use a 529 plan for dual enrollment, make a list of eligible expenses that would qualify. This includes tuition and fees, textbooks, course-related materials, and computer or software you might need to complete coursework.
After you have a list of qualified expenses, request funds from your 529 plan. Make sure you do this in the same tax year you plan to be dual enrolled to avoid penalties.
You can either have the funds disbursed directly to the school you’re enrolled at or request a reimbursement for qualified expenses. Direct disbursement is the easiest way to avoid mistakes and make sure you’re in compliance with your state’s rules, however, if you find yourself paying for something out of pocket, you can reimburse yourself for it later.
Keep detailed records while you are dual enrolled. This includes receipts as well as enrollment paperwork to verify you are taking classes and using the funds from your plan as intended.
Benefits Of Using A 529 Plan For Dual Enrollment
Aside from being able to earn college credits while you’re still in high school, there are some important benefits for parents and students to consider when using a 529 plan for dual enrollment.
A 529 plan is a tax-advantaged savings plan that allows you to save for educational expenses tax-free. When you make a withdrawal from your account for a qualified expense, you do so without paying taxes on it. And because you can invest in stocks or mutual funds in your 529 plan, your savings can grow tax-free too.
Some states may also allow parents to deduct plan contributions from their state income taxes. This can help lower their bill and can make a 529 a part of their overall tax strategy.
By earning college credit in high school, students can reduce the amount of time they have to spend earning a four-year degree. If you plan to finance your education with student loans, dual enrolling during high school can help you reduce your total student loan bill in the future.
Disadvantages Of Using A 529 Plan For Dual Enrollment
While there are some clear benefits of using a 529 plan for dual enrollment, there are some downsides to consider.
Funds can only be used on qualified expenses. High schoolers that have to take public transportation or drive to a local community college campus won’t be able to use their 529 plan savings to get to and from class.
You have to pay attention to when funds are withdrawn to avoid taxes and penalties. When you make a withdrawal, the funds have to be used in the same tax year. You’ll want to keep track of your expenses to avoid mistakes.
Parents also want to be careful not to overfund a 529 plan. This can lead to withdrawal penalties and can impact a student’s future financial aid package.
Alternatives To Using A 529 Plan For Dual Enrollment Costs
Dual enrollment can help you get a head start on college but it will come at a cost. While a 529 plan is one way you can pay for dual enrollment, it isn’t the only way.
Some dual enrollment programs offer grants and scholarships. If you’re interested in dual enrollment but are concerned about the cost, contact the program you want to enroll in directly and see what they have to offer.
Employers offer tuition assistance programs to their employees that may also be used for dual enrollment. Parents should contact their benefits coordinator to see if that’s an option and what the requirements are to use the benefit.
Look to see if a tuition payment plan is an option. Dual enrollment programs may work with students to break down the total cost into more manageable payments.
Nonprofits or civic organizations within your community may offer tuition assistance programs as well. If you’re committed to dual enrollment, reach out to see if they might consider sponsoring you.
Dual enrollment is a great way to get a head start on college. A 529 plan can be used to cover the cost, making the cost of getting a degree more affordable in the long run.