Student loan payments are officially back. If you’re feeling the pressure, you’re not alone. But here’s a lesser-known tip that could give you some relief: your 529 college savings plan might be the secret weapon to pay off those loans — without penalty.

💡 Wait… You Can Use a 529 for Loans?

Yes! Under federal law, you can use up to $10,000 from a 529 plan to pay down student loans. And it doesn’t stop there — you can also use an additional $10,000 to pay off a sibling’s student loans. It’s a one-time cap per borrower, but for many people, it’s enough to make a serious dent in their balance.

So if your parents (or you) contribute to a 529 plan — even if you’ve already graduated — this benefit might still be on the table.

🗺️ Bonus: Get a State Tax Deduction When You Contribute

Here’s the kicker: in some states, you can contribute to a 529 plan and get a state tax deduction, even if you turn around and use those funds to pay off student loans. It’s a powerful two-in-one move: save on taxes and reduce your debt.

Here are the states where that’s currently possible:

IN, IA, LA, MD, MI, MS, MT, NE, OH, OK, OR, SC, UT, VA, VT, WI

Each state has its own rules and contribution deadlines, so make sure to check your plan’s fine print or talk to a tax advisor.

💬 Real Talk: Don’t Leave Free Money on the Table

If you’ve got student loans, every dollar counts. This strategy won’t erase your entire balance, but it will give you a head start — and possibly a tax break too.

Curious if you’re eligible? Reach out to us at hello@pelicaninvests.com to find out.

This post is part of our series, “What Are Qualified Education Expenses? A Family Guide to Smarter Spending.”