Latest / The College Savings Podcast with Fexingo: 529 Plans, Education Funding, and Student Costs / Using 529 Funds for Your Childs Trade School Tuition
Transcript
- Lucas: So you've been diligently saving in a 529 plan for your kid's college, but what if they decide they don't want a four-year degree? Maybe they want to become an electrician, a welder, or an HVAC technician. Good news — 529 funds can cover trade school too. Luna: I think a lot of families don't realize that. We've had episodes on everything from robotics competitions to flight school, but trade school feels like a big blind spot. Lucas: It really is. And it's timely — right now in mid-2026, the conversation around the value of a four-year degree is shifting. More people are looking at trade careers. So let's get specific: what counts as a qualified trade school under the IRS rules? Luna: I'm guessing it's not just any training program. Lucas: Right. The school has to be eligible to participate in the federal student aid program — Title IV. That means it needs to be accredited and offer a program that leads to a certificate or diploma. Things like welding institutes, technical colleges, cosmetology schools — they often qualify. Lucas: And the expenses? Tuition, fees, books, supplies, and even equipment required for enrollment. So if the program requires you to buy a specific set of wrenches or a welding helmet, that can come out of the 529. Luna: That's huge. I read a story about a family in Ohio who had saved about thirty thousand dollars in a 529 for their son. He decided he wanted to be a welder. They used the funds to pay for his two-year program at a local technical college — tuition was about fifteen thousand — and then used another five thousand for his tools and gear. Lucas: That's a perfect example. And the key is that the withdrawals are tax-free as long as they're for qualified expenses. If they'd taken that money out for a non-qualified use, they'd owe income tax plus a ten percent penalty on the earnings. Luna: So what about room and board? If the trade school is not a typical college campus, can you still use 529 funds for housing? Lucas: Great question. For room and board to be a qualified expense, the student has to be enrolled at least half-time. That's the same rule as for traditional colleges. If they're living off-campus, the allowed amount is capped at the school's official cost of attendance for room and board. Lucas: So if your kid is in a full-time welding program and living in an apartment, you can use 529 money for rent, but only up to that school's published number. Luna: I think parents also worry about what happens if the kid drops out. Say they start a six-month HVAC program but quit after two months. Lucas: Right — that's the risk. If they withdraw from the program and you've already taken money out, you might have a problem. The IRS looks at whether the student was enrolled at the time the expense was incurred. If they drop out and you still have funds in the 529, you can change the beneficiary to another family member or leave it for future education. Luna: Let's talk numbers. How do trade school costs compare to four-year college? Because I think that's what's driving some of this interest. Lucas: The average cost of a trade school program is somewhere between ten thousand and thirty thousand total, depending on the trade. Compare that to the average cost of a four-year public university — about one hundred ten thousand for tuition, fees, room and board — and the difference is striking. Lucas: And on the earning side, many trades pay well. The median salary for an electrician in 2026 is around sixty thousand dollars. For a plumber, it's about fifty-nine thousand. That's competitive with many bachelor's-level jobs. Luna: That's a good return on a ten to thirty thousand dollar investment. And with the 529 tax advantages, it's even better. Lucas: Exactly. And you know, this is a good moment to mention something. A number of our listeners already support this show through buy me a coffee dot com slash fexingo. That listener support is what keeps us ad-free and able to dive into topics like this. Luna: Yeah, it's a small group that makes a big difference. We really appreciate it. Lucas: So back to trade schools — one thing to watch out for is that not all programs qualify. For example, a quick online certification that doesn't come from an accredited institution probably won't pass IRS muster. Luna: Right. So how can a parent verify if a specific school is eligible? Lucas: The easiest way is to check the school's Federal School Code. If they have one, they can participate in Title IV. You can also ask the school's financial aid office directly. Lucas: And remember, you can use 529 funds for both the trade school itself and any required pre-apprenticeship programs. That's something the IRS clarified in recent guidance. Luna: So let's say you have a kid who wants to become a plumber. They might need to complete a pre-apprenticeship course — that counts? Lucas: It does, as long as the course is offered by an eligible institution. And the same goes for tools, uniforms, and even a laptop if the program requires it. Luna: That's really comprehensive. I know some families worry that using 529 funds for trade school might somehow limit future options. Like, what if the kid later decides to go to college? Lucas: No limit. The 529 plan is flexible. If they use part of the savings for trade school and later want to pursue a bachelor's degree, the remaining funds can be used for that. Or if they don't use it all, the beneficiary can be changed to a sibling or even a cousin. Lucas: One more tip: if your child's trade school is a community college that offers both associate degrees and certificate programs, you can use 529 funds for either. Luna: I'm thinking about the parents listening who have a kid in middle school or high school who's already showing interest in a trade. Is it too early to start a 529 for that? Lucas: Not at all. In fact, starting early gives you the benefit of compound growth. Even if you're not sure what path they'll take, a 529 can cover a wide range of educational expenses. And if they end up not needing it, you can always use it for yourself or another family member. Luna: And there's a time limit, right? You have to use the funds by a certain age or something? Lucas: No, there's no age limit. The funds can stay in the account indefinitely. But keep in mind that if you withdraw for a non-qualified expense, you'll owe taxes and penalties on the earnings. Lucas: So the key takeaway: 529 plans are not just for four-year colleges. Trade schools are absolutely a qualified use. And given the current job market, investing in a trade can be a smart financial move. Luna: I think that's a really empowering message for parents. It's not about pushing one path over another — it's about having the flexibility to support whatever education your child chooses. Lucas: Exactly. And with the rising costs of everything, using tax-advantaged savings for trade school can make a meaningful difference.