Learn How to Pay for Short Study Abroad Trips

Short-term study abroad students can pay for some - but not all - program expenses through withdrawals from a 529 plan, a tax-advantaged higher education investment account.

Students taking an international course offered by their U.S. university can easily find out the full cost of attendance, but not all of these costs are allowed expenses for 529 withdrawals, says Michael Eisenberg, a Los Angeles-based certified public accountant and personal financial specialist.

Tuition and textbooks are qualified expenses, an educational cost that can be withdrawn from these college savings plans without incurring a tax penalty. And room and board expenses qualify as well, depending on the circumstances.

Housing and food costs on a weeklong side trip the student decided to take - a trip that isn't directly education related - could not, for example, be covered by 529 plan funds.

Some expenses are never allowed regardless of the length of the course: currency exchange, international travel and health care costs. For families who will use some 529 plan funds for short-term or summer study abroad programs, experts recommend the following.

[Explore the colleges where the most students study abroad.]

1. Withdraw 529 plan funds for tuition and textbooks: Costs associated with overseas trips offered by U.S. universities are subject to the rules of the Internal Revenue Service when it comes to qualified educational expenses, Eisenberg says. Tuition and textbooks are always qualified expenses, provided the student is at least a half-time student and attending an IRS-designated eligible educational institution, he says.

2. Plan for ineligible expenses: Families shouldn't withdraw funds for health care, currency or transportation expenses from 529 plan accounts, Eisenberg says. However, they should estimate those costs.

Students can purchase international health insurance in short increments such as 30 days, says Chris Deegan, director of the study abroad program at the University of Illinois--Chicago.

Jimmy Williams, a certified public accountant and personal financial specialist in Oklahoma, says differences in the currency rate of exchange can either boost or deflate costs by 10 percent in a week for most European countries. However, any tuition and other costs paid directly to the U.S. university do not incur currency exchange fluctuation, since the program is priced in U.S. dollars, Williams says.

[Know how to use 529 plan savings to pay for college.]

3. Apply for study abroad scholarships: Study abroad scholarships can pay for short-term overseas studies or fill in the gap from what can't be withdrawn from a 529 plan, Eisenberg says. Parents may be surprised at how much funding is available for these experiences.

"There are a substantial amount of scholarships available to study abroad students that isn't available to students studying solely in the U.S.," Deegan says.

Pell Grant-eligible students can apply for the Benjamin A. Gilman International Scholarship, he says, which may pay for up to $8,000 of expenses. Last year, $300,000 in scholarship and grant dollars were awarded at the University of Illinois--Chicago for all study abroad programs.

[Learn more about paying for study abroad with 529 plan.]

4. Determine entire room and board expenses before withdrawing funds: Room and board charges can be qualified expenses, but it's the amount covered that varies.

For example, a student is taking a three-week educational trip to Paris. On-campus housing and a meal plan for the three weeks costs $2,000, but the student has a friend in Paris he or she can stay with off-campus for a month for $1,500, including food - $500 less than the room and board purchased from the university.

But since the course is 21 days long, the cost of the apartment for the other 10 days is not a direct educational expense, Eisenberg says. Almost a third of that room and board could incur a tax penalty if withdrawn from a 529 plan.

Parents and students need to evaluate each associated cost to determine both what can be withdrawn and what experiences they're willing to pay for, experts say.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

Source: http://news.yahoo.com/learn-pay-short-study-abroad-trips-142158808.html

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