<p>If you have a 529 plan for each child and the oldest takes out Stafford Student Loans to contribute to the cost of attendance, can you apply unused funds from the second child to help pay off the first child's loans after graduation?</p>
<p>No. Loan payoff is not a qualified expense for 529 plan.</p>
<p>Thank you.</p>
<p>The qualified college expenses need to be incurred in the same tax year as the 529 distribution. I would think you could pay qualified expenses with a loan and then pay off the loan principle but not the interest later in the same year with 529 funds. It would be the same as paying out of pocket and then reimbursing yourself from the 529 in the same year. But that’s not what you are proposing. You can change the beneficiary of 529 plans from one child to another but you need to go through the financial institution to do so before using the funds for the 2nd child’s qualified expenses.</p>