How To Use A 529 Plan For Trade School

You can potentially use a 529 plan to pay for trade school, vocational school, and apprenticeships.

If you or your family have saved money for your education within a 529 plan, you can use those funds to pay for qualified education expenses without tax implications. 

But how about students who opt to attend a trade school instead of a traditional college or university? Can you still use the funds in your 529 to cover college costs?

We explore what the funds in your 529 can be used for, whether apprenticeships are eligible, and share some tips of how to fill any potential funding gaps. 

Can You Use A 529 To Pay For Trade School?

Yes, the funds in your 529 can be used to pay for an eligible trade school. Although not all vocational schools are eligible, many are. 

Which Vocational Schools Are Eligible?

You can use the money in a 529 to cover the cost of an education at certain vocational schools. Qualifying trade and vocational trade school programs must be sponsored by schools that are eligible for Title IV federal student aid.
In order to determine if the institution you have in mind accepts federal aid, search for a Federal School Code on the Free Application for Federal Student Aid (FAFSA).
It requires a bit of research, but you can often find a vocational or trade school offering the skill you want to learn that is eligible for your 529 funds. For example, in Ohio, the Ohio Department of Higher Education operates 50 career centers across the state that are eligible for 529 fund use.

Are Apprenticeships Eligible?

An apprenticeship is often a viable alternative to a traditional trade school or vocational school path. Generally, an apprenticeship is a long-term, paid working program that includes both on-the-job training and classroom instruction.
In some cases, you can use 529 funds to cover expenses related to an apprenticeship program. But the apprenticeship program must be registered and certified with the Secretary of Labor to qualify. 

What Expenses Can You Cover With A 529?

As mentioned, if you are attending an eligible trade school or apprenticeship program, you can use the funds in your 529 to cover certain expenses. Qualified expenses include:

• Tuition
• School fees
• Textbooks
• Supplies and equipment required for attendance, including tools
• Computers
• Room and board 

If you use the funds in your 529 to pay for a non-qualified expense, you’ll have to pay federal income tax and a 10% penalty on the earnings. 

How To Fund Any Gaps

In most cases, trade school students with a 529 will be able to use plan funds to pay for their education. However, in some cases, you might need to reconsider which trade school you choose to attend. 

Depending on your situation, your 529 account may or may not have enough funds available to cover all of your education costs. If you can’t pay for all of your trade school expenses using 529 funds, you’ll need to come up with some other ways you can pay for the remaining costs. We outline the best ways to fund the remaining costs from most ideal to least efficient below:

• Scholarships. When you win a scholarship, you can use the money for school and you won’t have to pay it back. Try to apply for at least 50 scholarships to land money for school. Use our guide of scholarships by state to help you find scholarships to apply for. 
• Grants. Grants are another type of financial award that you don’t have to pay back. 
• Personal savings. If you’ve worked during high school or have funds tucked away from holiday presents, consider tapping into those funds to cover your educational costs. 
• A part-time or summer job. It’s usually possible to work while you attend school. Even if you can’t work and attend class at the same time, it’s often possible to work a summer job to build up funds to cover your next semester. Don’t overlook your earning potential as a way to pay for school.
• Employer tuition reimbursement programs. Some employers offer tuition reimbursement as a perk of working for them. A few employers offering tuition reimbursement include Carhartt, Carvana, and Nvidia. When looking for a job, it might be helpful to include employers who offer this perk in your search. 
• Help from relatives. If you have relatives who want to help you pay for school, that’s always a welcome source of funds. 
• Student loans. It’s possible to pay for trade school costs with student loans. But since you’ll have to repay the funds with interest, these should be treated as the last option.

When it comes to paying for school, don’t be afraid to get creative. Generally, it’s a good idea to limit the amount of student loans you take on. After graduation, you’ll be grateful you did everything you could to avoid taking out more loans than you needed to. 

The Bottom Line

It’s possible to use a 529 to fund your trade school education. Although there are limitations on which vocational schools are eligible, many are. Do you research before signing up for classes to ensure you are able to use the funding source you had in mind to pay for school without any penalties.