529 Plans and Scholarships How Extra Funds Get Taxed

The College Savings Podcast with Fexingo: 529 Plans, Education Funding, and Student Costs · Jul 17, 2026 · 13m · transcript

Lucas and Luna dive into a common 529 plan blind spot: what happens when your child wins a scholarship that covers the same expenses you've been saving for. They walk through the scholarship exception to the 10 percent penalty on non-qualified withdrawals, how to calculate the penalty-free amount, and the tricky timing rule that trips up families who take the scholarship before filing the 529 disbursement. They also compare the scholarship handling rules for state vs. private scholarships and share a real-world strategy for avoiding the penalty when a full ride leaves a surplus. Perfect…