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What happens if my child receives a scholarship to school?

A 529 isn’t limited to just paying undergraduate tuition expenses. It can also be used to pay for other college-related expenses, including dorm fees and books. If the scholarship covers all expenses, then you can change the beneficiary of the account or withdraw the money for a different purpose. However, if you choose to withdraw the money and use it for something else, a 10% penalty and tax will apply to the earnings portion of the investment.

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