Can You Use a 529 Plan to Pay for Trade School?

529 plans can be used to pay for postsecondary education at any eligible institution, including trade schools. 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 referred to as a vocational school, technical school or career college, is a post-secondary 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 has to be at least 16 or 17 years old and have a high school diploma or GED.

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. For example, air traffic controllers have an annual average salary of over $129,000 and elevator mechanics earn $78,000 on average, according to Glassdoor.com.

The average starting salary for those with a bachelor’s degree was just over $50,000 for the Class of 2017, according to the National Association of Colleges and Employment.

How much does trade school cost?

Trade school costs much less than 4-year colleges. In fact, the average cost to complete a trade school program is $33,000, according to Value Colleges, which is less than the $35,830 current cost of one year of tuition and fees at a private nonprofit 4-year college reported by the College Board. 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 4-year college degree. However, in some industries a bachelor’s degree is required to move up into higher level positions. 

Can you pay for trade school with a 529 plan?

Students can use a 529 plan to pay for trade school programs offered by a college that is eligible for Title IV federal student aid. This includes many cosmetology schools, technical colleges, culinary schools and even a golf academy. Students can search for eligible trade schools using the Federal School Code Lookup Tool.

If parents originally set up a 529 plan to save for a child’s 4-year college degree, they may still withdraw funds tax-free to pay for trade school expenses. If there are leftover funds in the 529 plan after trade school is paid for, parents can change the beneficiary to a qualifying family member, use the funds to continue their own education or take a non-qualified distribution and pay income tax and a 10% on the earnings portion of the withdrawal.

Which expenses are 529 plan eligible?

Qualified higher 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 loans

Can you use student loans to pay for trade school?

Students can take out student loans to pay for an accredited trade school. Federal subsidized and unsubsidized loans are available to those who qualify, and there are also private student loans designed to help pay for trade school. Students may also apply for trade school scholarships to help cover costs.