The federal government has expanded the use of the 529 college savings plan to pay down college loans up to $10,000.
Part of the Secure Act, signed in December 2019, the new use for college loans will go into effect Jan. 1, 2020.
A 529 college savings plan allows families to save after-tax dollars for college costs. Contributions grow tax free and you can use money in the account for qualified educational expenses.
A total of 34 states and Washington, D.C., also offer a state income tax deduction or credit for the money you put in a 529 plan, according to Savingforcollege.com.
However, the expanded use of 529 funds for loan paydown, may not apply in every state. Some states limit uses of 529 plans to such things as tuition, fees, textbooks and supplies only at a post-secondary school.
It's possible that some states will hit savers with penalties if they use their 529 savings to pay down student loans.
Check with an accountant about the process, especially in New York or California.