Hardship Withdrawals

[Guest west]

Does the Code define what types of education "post-secondary" education includes? Or are we to assume it only includes college and university education - not vocational/occupational education

[Guest Remysis]

I don't believe "postsecondary education" is actually defined in the Code and I haven't found any other specific administrative guidance. The closest thing is "qualified higher education expense" under section 529. For this the test is whether school is eligible for federal financial aid to students under Title IV. This certainly includes accredited career schools such as beauty school, massage, tractor trailer driving, etc. I would also note that, in guidance regarding 529 plans and HOPE and lifetime learning credits, the IRS tends to equate "postsecondary" with the types of schools eligible.

I readily concede this isn't exactly on point, and "postsecondary" may be read to impose its own separate requirement (e.g. a program that requires a high school diploma or at least a GED). Still, if it's good enough for a tax-free distribution from a 529 plan, it's good enough for me for a hardship withdrawal. With cautions, I have advised clients that the "eligible for Title IV financial aid" test is a sensible rule of thumb for hardship withdrawals.