I know this question has been addressed in the past but question to some of those that already have been through this. As I understand it, if your DD/DS goes to a Service Academy, the full amount of the "value" of that education is considered to be a "Scholarship"...at least in the eyes of the IRS and how it applies the rules to penalties and withdrawals from the 529. I have heard various amounts estimated for a SA education scholarship value but most are around $350k-$450k. Given this, I think most of the research I have done indicates that I can pull up to this amount out penalty free and only pay ordinary taxes on the earnings(less principal paid in). I also know you can change the beneficiary to another child or even to yourself for Qualified Educational expenses. Question is the following: If I were to earmark the amount for DD to use for possibly going to graduate school AFTER her time at USNA or her service obligation and she ultimately does not go to grad school or Navy pays for grad school, will I still be able to withdraw the amount penalty free even though she had graduated from USNA years before? Is there a time limit to which the amount up the scholarship value can be pulled out penalty free? Any accountants or tax lawyers out there?