Using Your 529 Savings Account

You’ve been saving for your loved one, now it’s time to put your 529 funds to use. Did you know that your funds can go towards more than just college tuition? A Bright Start College Savings account can be used for a wide range of qualified expenses at eligible institutions.

Before You Use Your Bright Start Funds

Here are a few key things to remember as you consider using your 529 funds:
  • As the account owner of the Bright Start 529 account you control the account and determine when and where funds are paid.
  • The beneficiary you have named on your account (the student you are saving for) is the individual whose qualified college expenses can be paid.
  • Your Bright Start account is flexible and can be used at eligible educational institutions across Illinois, the nation, and even some foreign schools.
Keep reading to learn more about using your Bright Start 529 funds.

Ready to Use Your Bright Start Funds?

When the beneficiary of the account is ready for college, you can rest assured that your Bright Start savings will be available to help with the costs of college. We’ve included the following helpful tips and considerations as you get ready to use your funds.


Request a withdrawal online or by downloading and submitting the Withdrawal Request form.

An account owner or custodian (under a state UGMA/UTMA) may request a withdrawal online or by downloading and submitting the Withdrawal Request form.

Be sure to plan ahead when requesting a withdrawal. Generally, if a request is received in good order on a business day prior to the close of the markets (typically 3 p.m., Central time), the investments will be sold at that day’s closing prices, the funds will be received by the Plan the following business day, and a check mailed. Please plan ahead and allow 7 – 10 days for mail time. For withdrawals payable to the account owner’s bank account, please allow several business days for your bank to process the payment and credit your account.


529 funds can be used to cover a variety of qualified educational expenses.

IRS Publication 970 (January 17, 2020) defines qualified education expenses as: Expenses related to enrollment or attendance at an eligible postsecondary school. As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time, defined later.
  1. The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school.
    1. Tuition and fees.
    2. Books, supplies, and equipment.
  2. Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school.
  3. Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). The expense for room and board qualifies only to the extent that it isn’t more than the greater of the following two amounts.
    1. The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student.
    2. The actual amount charged if the student is residing in housing owned or operated by the school. You may need to contact the eligible educational institution for qualified room and board costs.
  4. The purchase of computer or peripheral equipment, computer software, or Internet access and related services if it’s to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible postsecondary school. (This doesn’t include expenses for computer software for sports, games, or hobbies unless the software is predominantly educational in nature.)
  5. For distributions made after 2018, expenses for fees, books, supplies, and equipment required for the designated beneficiary’s participation in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act.
  6. For distributions made after 2018, no more than $10,000 paid as principal or interest on qualified student loans of the designated beneficiary or the designated beneficiary’s sibling. A sibling includes a brother, sister, stepbrother, or stepsister. For purposes of the $10,000 limitation, amounts treated as a qualified higher education expense for the loans of a sibling are taken into account for the sibling and not for the designated beneficiary. You can’t deduct as interest on a student loan any amount paid from a distribution of earnings from a qualified tuition program after 2018 to the extent the earnings are treated as a tax free because they were used to pay student loan interest.
Qualified Elementary and Secondary Education Expenses

These are expenses for no more than $10,000 of tuition, incurred by a designated beneficiary, in connection with enrollment or attendance at an eligible elementary or secondary school.

Half-time student. A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled.


*CAUTION – Illinois Qualified Expenses do not include expenses for:
  • tuition in connection with the Beneficiary’s enrollment or attendance at an elementary or secondary public, private, or religious school. The amount of cash distributions for such expenses from all 529 qualified tuition programs with respect to a Beneficiary shall, in the aggregate, not exceed $10,000 during the taxable year;
  • tuition, fees, books, supplies, and equipment required for participation in an Apprenticeship Program;
  • payments on Qualified Education Loans of the Beneficiary or a sibling of the Beneficiary, subject to a $10,000 aggregate limit.
  • If a withdrawal is made for such purposes it may be a Federal Qualified Withdrawal and not be included in income for federal and Illinois purposes, but if an Illinois income tax deduction was previously claimed for Contributions to the Account all or part of that deduction may be added back to income for Illinois income tax purposes.
Please consult with your tax advisor.

Ready to Withdraw Funds?

When it comes time to use your 529 plan for qualified expenses, withdrawing funds is simple. Money from your Bright Start account can be paid directly to you as the account owner, directly to the beneficiary, to the account owner’s bank account, or to an eligible educational institution.

An account owner or custodian (under a state UGMA/UTMA) may request a withdrawal online or by downloading and submitting the Withdrawal Request Form.

Be sure to plan ahead when requesting a withdrawal. Generally, if a request is received in good order on a business day prior to the close of the markets (typically 3 p.m., Central time), the investments will be sold at that day’s closing prices, the funds will be received by the Plan the following business day, and a check mailed. Please plan ahead and allow 7 – 10 days for mail time. For withdrawals payable to the account owner’s bank account, please allow several business days for your bank to process the payment and credit your account.

Please Note: the earnings portion of a withdrawal for nonqualified expenses is subject to federal and state income tax, an IRS 10% penalty tax, and may be subject to an Illinois recapture tax of previously deducted contributions.


Withdraw Funds at Your Convenience with Bright Start

Log in to your online account and request a withdrawal.

Print and mail in a completed Withdrawal Request Form.

Important timing considerations when withdrawing funds

Be sure to plan ahead when requesting a withdrawal. Generally, if a request is received in good order on a business day prior to the close of the markets (typically 3 pm Central time), the investments will be sold at that day’s closing price, we will receive the proceeds from the mutual fund the next morning, and a check will be mailed. Please plan ahead and allow adequate time for the college to receive and process the payment (we suggest requesting your withdrawal 10 days prior to the due date). For withdrawals payable to the account owner’s bank account, please allow several business days for your bank to process the transfer and credit your account.

Bright Start can also make payments directly to a college or university. Please note that some institutions may take three to seven business days to post payments to a student account. Please allow sufficient time for mail time and processing by the school.


Other Considerations and Resources

The tax benefits afforded to 529 plans must be coordinated with other programs designed to provide tax benefits for meeting higher education expenses in order to avoid the duplication of ben­efits. You should consult with a qualified tax advisor with respect to the various education benefits.

Coordination With American Opportunity and Lifetime Learning Credits

An American Opportunity or Lifetime Learning Credit can be claimed in the same year the beneficiary takes a tax-free distribu­tion from a qualified tuition program, as long as the same expenses aren’t used for both benefits. This means that after the beneficiary reduces qualified education expenses using tax-free educational assis­tance, he or she must further reduce them by the expenses taken into account in determining the credit.

Coordination With Coverdell Education Savings Account Distributions

If a designated beneficiary receives distributions from both a quali­fied tuition program and a Coverdell Education Savings Account in the same year, and the total of these distributions are more than the beneficiary’s adjusted qualified higher education expenses, the expenses must be allocated between the distributions. For purposes of this allocation, disregard any qualified elementary and secondary education expenses.

Coordination With Tuition and Fees Deduction

A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a qualified tuition program as long as the same expenses aren’t used for both benefits.

Recontribution of Refunded Amounts

If a student receives a refund of qualified education expenses that were treated as paid by a 529 distribution, the student can recontribute these amounts into any 529 for which they are the beneficiary within 60 days after the date of the refund to avoid the need to figure the taxable part of the 529 distribution.  This can occur when a student drops a class mid-semester.

Resources