529 College Savings Plan Direct debit is your A+ way to pay

Pay your educational institution directly from a 529 account with Fidelity’s new direct debit payment process.1

Faster processing

Make a one-time or recurring payment, depending on the educational institution.

Fewer steps

One transaction from your Fidelity 529 to your educational institution.2

Maximize investment time

Stay invested up to the moment you make a payment.

Why direct debit?


Direct debit (also known as ACH debit3 or e-check) is a convenient way to pay an educational institution in the US, letting you authorize the institution to collect payment for qualified educational expenses directly from your 529 account when due.


Direct debit may be used only for 529 distributions to qualified educational institutions in the United States to pay for qualified educational expenses as defined by Internal Revenue Code Section 529. Direct debit may not be used for any other 529 distribution purpose.

2 steps to paying with direct debit

  1. Contact the school or institution you’d like to pay

    Direct debit payments are initiated by the educational institution, not Fidelity. So, you’ll need to provide them with your:

    •  ABA routing number

    •  Fidelity account number containing a pre-fix.


    Find your routing and modified account numberLog In Required

  2. Fidelity processes your payment when requested by the school

    Direct debit requests received before 4 p.m. ET are generally processed on the same business day of receipt. To generate cash for your payment, Fidelity will sell positions in your designated 529 Portfolio(s).


    Tip: When using direct debit, first confirm the amount due to the school. You’ll want to be sure your account has sufficient funds for a successful payment. Your 529 account balance available for direct debit will be limited to 95% of your account value as of the close of the NYSE on the prior business day of receipt of your direct debit distribution request.


    Set up direct debit alertsLog In Required to notify you of any issues with a payment.

  • See more

    529 Portfolios are open for business each day the New York Stock Exchange (NYSE) is open for trading; however, the Portfolios will be closed for wire purchases and redemptions on days when the Federal Reserve Wire System is closed.  Each Portfolio's Unit value is determined as of the close of the NYSE (normally 4:00 p.m. Eastern time, but earlier on scheduled half-days, during restrictions or suspensions of trading, or in emergencies).

    When you place an order to buy or sell Units, including a direct debit order, your order, if deemed to be in good order by Fidelity, will be processed at the next Unit value to be calculated.  Direct debit requests received before 4:00 p.m. Eastern time, if deemed to be in good order by Fidelity, are generally processed on the same business day of receipt. If a direct debit request is received after the close of the NYSE or on a day when the NYSE is closed, the transaction will occur based on the Unit value calculated as of the close of the NYSE on the next business day on which the NYSE is open. Portfolio Units will be sold at the next Unit value calculated as of the close of the NYSE to cover the resulting distribution debit in the designated 529 account.

Please ensure you understand that the direct debit feature may be used only for 529 distributions to qualified educational institutions in the United States to pay for qualified educational expenses as defined by Internal Revenue Code Section 529 and that the feature may not be used for any other 529 distribution purpose. You acknowledge that 529 account direct debit payments will be reported as a beneficiary distribution, and IRS Form 1099-Q will be issued to the designated beneficiary of the 529 account. You understand that any earnings on 529 distributions not used for qualified educational expenses may be subject to income taxes and a 10% federal penalty tax.

FAQs

  • What are the federal income tax rules for 529 distributions?

    Distributions from 529 accounts are not subject to federal income taxes as long as the money is used for qualified educational expenses. If the distribution is not used for qualified educational expenses, any earnings on the distribution may be subject to income taxes and a 10% federal penalty tax.

    The direct debit feature may be used only for 529 distributions to qualified educational institutions in the United States to pay for qualified educational expenses as defined by Internal Revenue Code Section 529 and that the feature may not be used for any other 529 distribution purpose. 529 account direct debit payments will be reported as a beneficiary distribution, and IRS Form 1099-Q will be issued to the designated beneficiary of the 529 account.

    For more information, please consult with a tax professional.

  • How are 529 units sold?

    When selling positions, the price of your portfolio units (share prices) will be calculated at the close of the NYSE on the same business day the request is received, if deemed to be in good order, by Fidelity.1

    If your 529 account has more than one portfolio (investment option), Fidelity will sell portfolio positions proportionately to their value held in the designated 529 account. You may want to consult with a tax professional before making a distribution.

    To safeguard against potential market fluctuation, your 529 balance available for direct debit will be limited to 95% your account’s market value, as of the close of the NYSE on the prior business day.1

  • How will I know if a direct debit payment fails?
    Set up direct debit alerts to notify you of any issues with a payment. If a direct debit payment fails, an alert message will be triggered.
  • Are direct debit payments recurring or one-time payments?
    Direct debit payments can be set up to be recurring or can be one-time payments, depending on the educational institution.

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