One education cost 529 plans can't pay

The expenses for our son's junior year in college exceeded the amount left in his 529 plan, so he took out a $10,000 student loan. Then my father gifted $11,000 to the plan. Can our son use that money to pay off the loan?

No. Repaying a student loan isn't considered a qualified education expense, so if he uses the money that way it will be subject to federal and state tax (if any), as well as a 10 percent penalty. Instead, apply your dad's gift to the costs for your son's senior year.