In this Answers Answers segment of Motley Fool Answers, Alison Southwick and Robert Brokamp address a man with a happy problem to have: A large share of his son's college costs will be covered through the GI Bill after he gets out of the U.S. Navy. But being a good planner, dad has been setting aside money for those anticipated expenses in a dedicated higher education investment account: a 529 Plan. Question is, what's the best way to use the balance?

A full transcript follows the video.

This video was recorded on Aug. 29, 2017.

Alison Southwick: It's time for Answers Answers. Ernie sent us a card from British Columbia and he writes, "Hopefully you'll answer my question since I sent it to you on a postcard." The answer's yes! "Due to a generous scholarship from the Navy, my son will have a lot of money left in his 529 plan after graduation. Then he will serve in the Navy for at least five years. What can he do with the leftover money in the 529 plan? Thanks, Ernie." Should we get the gratuitous "give the money to us" jokes out of the way?

Robert Brokamp: Yes! Do that Ernie. All right, thanks. Bye. No, I'm just kidding.

Just so we're all clear, a 529 is a savings account for college. You put the money in. You don't get a tax break but it grows tax-free as long as the money is used for qualified higher education expenses.

If you don't use the money for qualified education expenses, the money that you put in actually comes out tax and penalty-free, because it's already been taxed, so you can take that money out and you don't have to worry about it. It's the earnings that will be taxed and then a 10% penalty if it's not used for the qualified higher education expenses.

So, one thing I would say first of all, Ernie, is to make sure that this scholarship covers everything, including room and board. Including books and things like that. If the scholarship doesn't, you can use the 529 for these other expenses.

Also, if you have other kids or other relatives who will be going to college, you can transfer the money to them. It could even be grandparents. It could even be yourself if you want to go back to school. You can transfer the money to another relative.

In your situation, there's even better news, and that is there is an exception to the 10% penalty if someone got a scholarship. So, if someone got a scholarship for $5,000, for example, you could take out $5,000 penalty-free. You're still going to pay taxes on the earnings, but you bypass the penalty. So, a lot of options, there.

And finally I'll also say if it's possible that your son will go to graduate school, you can just leave the money in there and he might tap it later. In fact, if he doesn't, you can just let it grow and he could use it for his own kids, because there's no limit on how long you leave the money in a 529.

Southwick: So many options!

Brokamp: So many options! And, of course, you can give it to us.

Southwick: What would you do if you had a bunch of 529 money just sitting around?

Brokamp: I think I would leave it in there, because we've talked before that I am considering going back to school perhaps one day, and I've read articles about how colleges are actually trying to get in on this a little bit. Like creating classes for the Social Security generation, because they have all this money. Maybe I'll use the 529 to get a degree, and then study abroad. Something like that.

Southwick: Yes, I'll do some air quotes. "Study a broad."

Brokamp: "A broad."

The Motley Fool has a disclosure policy.