How to Use a 529 Plan for Trade School

You will likely use a 529 plan to pay for trade school, vocational school, and apprenticeships.

If you or your family saves money for your education under a 529 plan, you can use that money to pay for qualified education expenses without any tax implications.

But what about students who choose to attend a trade school instead of a traditional college or university? Can you still use money in a 529 for college costs?

We explore what money in a 529 can be used for, whether apprenticeships qualify, and share some tips on 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 qualified trade school. Although not all vocational schools are qualified, many are.

Which vocational schools are eligible?

You can use the money in your 529 to cover tuition costs at some vocational schools. Eligible trade and vocational school programs must be sponsored by schools eligible for federal student aid under Title IV.
In order to determine whether the institution you are considering accepts federal aid, look for the federal school symbol on the website Free Application for Federal Student Aid (FAFSA).
It takes a little research, but you can often find a vocational or trade school that offers the skill you want to learn and is eligible for 529 funds. For example, in Ohio, the Ohio Department of Higher Education operates 50 career centers across the state that are eligible to use 529 funds.

Is apprenticeship eligible?

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

What expenses can you cover with a 529?

As mentioned earlier, if you attend a trade school or qualified apprenticeship program, you can use the money in your 529 for certain expenses. Eligible expenses include:

• teaching
• School fees
• Textbooks
• Supplies and equipment needed to attend including tools
• Computers
• Room and board

If you use the money in your 529 to pay nonqualified expenses, you will have to pay federal income tax and a 10% penalty on the earnings.

How to finance 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 may need to reconsider which trade school you choose to attend.

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

• Scholarships. When you win a scholarship, you can use the money to study and you won’t have to pay it back. Try to apply for at least 50 scholarships to get money for school. Use our guide to scholarships by state to help you find scholarships to apply to.
• Grants. Grants are another type of financial award that you do not have to repay.
• Personal savings. If you worked during high school or have money stashed away for holiday gifts, consider tapping those funds to cover your educational costs.
• Part-time or summer job. It is usually possible to work while attending school. Even if you can’t work and attend class at the same time, it is often possible to work a summer job to raise money to cover the following semester. Don’t ignore your earning potential as a way to pay for school.
• Tuition reimbursement programs for employers. Some employers offer tuition reimbursement as a benefit of working for them. A few employers that offer tuition reimbursement include Carhartt, Carvana, and Nvidia. When searching for a job, it may be helpful to include employers that offer this benefit in your search.
• Help from relatives. If you have relatives who want to help you pay for school, this is always a welcome source of funding.
• Student loans. It is possible to pay for trade school through student loans. But since you will have to repay the money with interest, it should be treated as a last option.

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

Bottom line

It is possible to use a 529 to fund your trade school education. Although there are restrictions on eligible vocational schools, many are eligible. Do your research before signing up for classes to make sure you can use the funding source you’re considering to pay for school without any penalties.