Can My IRA Be Used for College Tuition?

It's possible if you follow IRS rules

You can use your IRA to pay for college tuition even before you reach retirement age. In fact, your retirement savings can be used to pay for a wide range of education expenses for you, your spouse, children, or grandchildren without IRS penalties if you follow the specific rules.

Key Takeaways

  • Money in an IRA can be withdrawn early to pay for tuition and other qualified higher education expenses for you, your spouse, children, or grandchildren—without penalty.
  • To avoid paying a 10% early withdrawal penalty, the IRS requires proof that the student is attending an eligible institution.
  • The amount of the IRA withdrawal cannot be more than the qualifying expenses.
  • You will still be required to pay income taxes due on withdrawn funds.

Education: An Exception to the Rule

Generally, the IRS charges an additional 10% penalty on taxable withdrawals from IRAs, 401(k) plans, or other retirement savings vehicles if they are made prior to age 59½. This encourages people to protect their savings, so they do not need to rely solely on state benefits, such as Social Security, in their later years.

However, the IRS does offer a number of exceptions to this rule that are designed to assist people with some of the big, important expenses in life. In addition to provisions for first-time home buyers and those with heavy medical bills not covered by insurance, using IRA funds to pay for college tuition is one of the most useful exceptions to the 10% penalty rule.

Penalty Exemption Requirements

To be eligible for the penalty exemption, you or your family must have qualifying education expenses within the year you take the distribution. While you cannot take IRA funds to pay off student loans after graduation, you can withdraw your savings to offset the impact of loan payments while you or your family member is in school.

While the 10% penalty is waived for qualified education costs, you still need to pay the deferred income tax due on withdrawals of any untaxed money.

To avoid paying an early withdrawal penalty, you must show the student is attending an eligible institution of higher learning. This includes any university, college, vocational school, or other accredited public, private, or nonprofit post-secondary school that is eligible for the student aid programs offered through the U.S. Department of Education. Though this includes most institutions, verify your school's eligibility before withdrawing IRA funds.

Qualifying Expenses

In addition to tuition, qualifying educational expenses include administrative fees charged by the school; the cost of books, supplies, and equipment; and expenses for disability services, if required. If the student attends school more than half-time, the cost of room and board is also covered.

Any qualifying educational expense paid for in the current year using wages from employment, loans, savings, gifts, or inheritance can be offset with IRA funds. However, any expenses funded by tax-exempt scholarships or grants do not qualify. Expenses paid for with employer or veteran association education assistance are also excluded.

The amount of your IRA withdrawal cannot exceed the amount of your qualifying expenses. Any withdrawal of taxable funds over this amount is subject to the 10% penalty, in addition to income tax.

Rules for Roth IRAs

Contributions to Roth IRAs are always made with after-tax dollars and, unlike traditional IRAs, withdrawals are tax-free in retirement. Since withdrawals of contributions are not taxable, the 10% penalty does not apply. You can withdraw the full amount of your contributions to a Roth account—but not your earnings—tax-free and penalty-free at any age, for any purpose.

However, if you are younger than 59½ or have had your account for less than five years, any earnings you withdraw are taxable at your current income tax rate, even if your withdrawal is penalty-free.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. Internal Revenue Service. "Publication 970 Tax Benefits for Education," Page 55.

  2. Internal Revenue Service. "Retirement Topics - Exceptions to Tax on Early Distributions."

  3. Internal Revenue Service. "Qualified Education Expenses."

  4. Internal Revenue Service. "Retirement and Taxes: Understanding IRAs."

  5. Internal Revenue Service. "What Is an Eligible Educational Institution?"

  6. Internal Revenue Service. "Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)," Page 27.

  7. Internal Revenue Service. "Publication 970 Tax Benefits for Education," Page 8.

  8. Internal Revenue Service. "Publication 970 Tax Benefits for Education," Page 56.

  9. Internal Revenue Service. "Traditional and Roth IRAs."

  10. Internal Revenue Service. "Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs)," Pages 31-32.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.