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College can be a difficult adjustment for some students. First-time, full-time undergraduate students have a 12-month dropout rate of 23.3% within their first year. This rate more than doubles for part-time students.

While there can be any number of reasons a student may withdraw from college – time management struggles, academic burnout or health struggles to name few  – 529 accounts offer a reassuring amount of flexibility for families adjusting to this change of plans.

Here are six options to consider:

• Keep your account. A student has 10 years after their projected high school graduation date to use their Prepaid529 contract or Tuition Track Portfolio account. For Invest529 Market Portfolios, a student has 30 years from their projected high school graduate date. Most careers require some advanced training, so whether your student pursues a degree at a different college or university, or shifts to a credentialing program, there will likely be a cost associated with that education. And, as long as the program is an eligible educational institution, it will likely be an eligible 529 expense.
• Transfer the existing account benefits to a member of the current student’s family. Does your student have an older or younger sibling whose education you can support using your 529 account? A “member of the family” as defined in applicable federal law   includes siblings, parents, children, aunts, uncles and first cousins. Additional rules apply for Prepaid529 and Tuition Track Portfolio accounts.
• Use for expenses related to eligible technical/vocational schools or registered apprenticeships. 529 accounts can be used to fund training expenses including fees, books, supplies and equipment for eligible programs.
• Roll over unused funds into a Roth IRA account owned by the student.  As of 2024, families who are saving for education in 529 accounts will be allowed to roll over eligible unused funds from those accounts into Roth individual retirement accounts (IRA) without incurring tax penalties. The amount eligible to be rolled over to a Roth IRA must have been in the 529 account for at least five (5) years and must have maintained the 529 account for at least 15 years. Additional rules apply. Related: What you Need to Know about Roth IRA Rollovers.
• Pay up to $10,000 in principal or interest on a qualified student loan. There are not any penalties or tax consequences when you use a 529 account to repay a qualified student loan. This applies to any qualified loans (including federal and most private loans) for the student, or the student’s sibling, up to a $10,000 lifetime cap.
• Cancel the account. Cancellations and withdrawals of funds not used for qualified higher education expenses are subject to federal income tax on the earnings, Virginia state income tax on the earnings for Virginia taxpayers as well as recapture of any deduction. There is also a federal penalty of 10% of the earnings for non-qualified withdrawals.

If you have a Prepaid529 account and your student withdrew from a school in Virginia, submit a Stop Benefits request right away. This prevents your benefits for the remaining semesters from being automatically paid to the school.

No one plans for a student to leave college, but if it happens, your 529 account doesn’t have to go to waste. With flexible options you can still put those savings to good use. Understanding your choices can help you make a confident, informed decision that keeps your financial goals on track.