Before the SECURE Act, 529 funds were primarily restricted to current educational costs like tuition, fees, room, board and books. The act allowed 529 plan beneficiaries to take tax-free distributions to pay the principal and interest on qualified education loans (including federal and most private student loans). Lifetime limits: The law imposed a strict lifetime limit of $10,000 per 529 plan beneficiary for student loan repayments. How to use a 529 plan towards student loansThe best way to optimize 529 funds is to use them to avoid taking out student loans. You can use $10,000 of money in a 529 account without penalty to pay for student loans.