You can use 529 plans to pay for postsecondary education at any eligible institution, including trade schools and apprenticeship programs. Trade school programs typically take less than two years to complete and are more affordable than a bachelor’s degree from a 4-year college.
What is a trade school?
A trade school, also known as a vocational school, technical school, or career college, is a postsecondary educational institution that offers skills training for a particular occupation. Students can generally complete a trade school program in significantly less time than it takes to complete a bachelor’s degree program and at a fraction of the cost.
Trade school programs can prepare students for lucrative careers such as dental hygienists, radiologic technologists, air traffic controllers, construction managers, real estate agents, chefs, HVAC technicians, electricians, and many more.
For most trade schools, the only requirements for admission are that the student be at least 16 or 17 years old and have a high school diploma or GED.
Can you pay for trade school with a 529 plan?
Students can use a 529 education savings plan to pay for trade school programs offered by eligible educational institutions that receive Title IV federal student aid. Eligible schools include many cosmetology schools, technical colleges, culinary schools, and golf academies. Students can search for eligible trade schools using the Federal School Code Lookup Tool.
Additional considerations for using a 529 plan
529 plans are tax-advantaged accounts, offering several tax benefits, including tax deductions in some states for contributions and tax-free growth and withdrawals. They also typically offer various investment options tailored to different risk levels and investment objectives. If seeking financial aid through FAFSA, 529 plans offer an advantage compared to other assets.
529 plans are also often advantageous compared to everyday savings accounts in terms of their tax benefits and investment returns. Compared to Roth IRAs, 529 plans do not have income limits for contributions, and their funds are specifically designed for education-related expenses, offering greater flexibility for educational planning.
If parents initially set up a 529 plan as a college savings plan for a four-year college degree, they may still withdraw funds tax-free to pay for trade school expenses. Suppose there are leftover funds in the 529 plan after paying for trade school. In that case, the account owner can change the beneficiary to a qualifying family member and use the funds to continue their education. They can also take a non-qualified withdrawal and pay federal income tax and a 10% penalty on the earnings portion of the distribution, though this often can and should be avoided.
Which expenses are 529 plan eligible?
Qualified education expenses at a trade school are the same as at a traditional 4-year college or community college. The qualified higher education expenses include:
- Tuition and fees
- Textbooks
- Supplies and equipment required for enrollment or attendance at the trade school, including tools
- Special needs expenses
- Computers, internet access, and related equipment
- Room and board expenses, including on- and off-campus, as long as the student is enrolled in an eligible trade school program on at least a half-time basis and the expenses were incurred during an academic period during which the student was enrolled or accepted for enrollment in a degree or certificate program or another program leading to a recognized education credential
- Student loan repayment
How much do trade jobs pay?
Annual salaries for trade school jobs vary depending on the type of work, level of experience, industry, and location. According to the National Center for Education Statistics, the median annual salary for technical and trade school jobs is $35,720.
However, there are many high-paying trade jobs. According to the Bureau of Labor Statistics, air traffic controllers have an average annual salary of over $137,380 in 2023. Elevator mechanics earned $102,420.
According to the National Association of Colleges and Employment, the average starting salary for the Class of 2023 for those with a bachelor’s degree was just over $64,291.
How much does trade school cost?
Trade school costs much less than four-year colleges. According to BestColleges, the average cost to complete a trade school program is around $15,000, far less than the current $41,540 cost of one year of tuition and fees at a private nonprofit four-year college. Trade school students who live at home with parents can also reduce or eliminate room and board costs.
Most trade school programs can be completed in two years or less, allowing students to enter the workforce sooner than those pursuing a four-year college degree. However, a bachelor’s degree is required in some industries to move up into higher-level positions.
Can you use student loans to pay for trade school?
Students can get financial aid and take out student loans to pay for an accredited trade school. Federal subsidized and unsubsidized loans are available to those who qualify, and private student loans designed to help pay for trade school are also available. Students may also apply for trade school scholarships to help cover costs.
