Amid Market Volatility, Experts Advise Strategic 529 Plan Withdrawals as Tuition Bills Come Due

As college tuition payments loom, financial experts are urging families to carefully plan withdrawals from their 529 savings accounts, especially in light of recent market volatility.

Since April, the S&P 500 has experienced sharp fluctuations, driven in part by changing U.S. tariff policies. While markets have rebounded from recent lows, some parents may find their 529 balances haven't fully recovered, just as tuition deadlines approach.

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“With a little planning, making withdrawals can be something to celebrate, not just something to fear,” said Smitha Walling, Head of Vanguard’s Education Savings Group.

Mary Morris, CEO of Commonwealth Savers, recommends that parents first evaluate their account's asset allocation. Most 529 plans use age-based portfolios that reduce stock exposure as a child nears college age. “If you are in a total stock portfolio, you may not want that ride,” Morris said. “You don’t want to get seasick.”

Richard Polimeni, head of education savings at Merrill Lynch, suggests de-risking part of the portfolio by reallocating to cash equivalents. However, he cautions against moving the entire balance, warning that “the worst thing an investor can do in a down market is panic and sell investments prematurely and lock in losses.”

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For those facing immediate tuition payments, Walling advises considering whether to use 529 funds now or delay withdrawals to allow for market recovery. Polimeni notes that reimbursements for eligible expenses can be made within the same calendar year, allowing several additional months for potential gains.

“Markets go up and down, but students’ goals remain the same,” said Chris McGee, chair of the College Savings Foundation.