Can a 529 Plan Be Used for Trade School? 3 Things to Know

The sky is the limit after high school graduation. Maybe you (or your child) want to go to a traditional four-year university — or maybe you want to get started on your career ASAP. If you’re ready to get to work, a skilled trade or technical education may be the right choice for you. These programs can set you up for a successful career in everything from construction to cosmetology to carpentry. You can become a welder, an electrician, or a plumber… the possibilities are endless!

And yes, you can use the NC 529 Plan to pay for trade school. However, there are some important details to keep in mind if you want to make the most of your education savings. Keep reading for answers to three of the most commonly asked questions.

1. Can 529 plans be used for all vocational schools?

No. Money from your NC 529 Account can only be used for eligible education institutions. Although most trade and vocational schools fall into this category, not all do.

To find out if the schools you’re considering are eligible, check out the Federal School Code Search available from the U.S. Department of Education. If your prospective school isn’t on the list, don’t commit to attend until you’ve contacted the admissions office and verified that the institution is, in fact, eligible.

2. Can 529 plans be used for trade school expenses other than tuition?

Yes. In addition to paying for your tuition and fees, you can use NC 529 funds to cover any qualified education expenses. These include books, supplies, room and board, and equipment required for your studies (including a computer and internet service).

Not all school-related expenses are qualified. For instance, you can’t use NC 529 funds to pay for your trade school application fee or school-sponsored health insurance.

Remember, if you use NC 529 funds to pay for something that isn’t a qualified education expense, it is considered a “non-qualified withdrawal” from your account. You’ll be required to pay federal and state income tax on the earnings portion of the withdrawal, along with a 10% penalty.

3. What happens to NC 529 funds I don’t use for school?

Since many career or technical education programs can be completed in two years or less, you may have leftover money in your NC 529 Account after you’re through with your training. Don’t worry — you won’t lose your money. Here are some ways you can use the remaining funds without having to pay taxes or fees:

• Let your money continue to grow. At some point down the road, you may decide to return to school for additional vocational training or to get a traditional college degree. Your NC 529 funds don’t expire and can be used to finance those pursuits when you’re ready.
• Change the beneficiary. You can keep the funds right where they are and make one of your relatives (like a parent, sibling, or cousin) the new beneficiary of the account. There’s no penalty or fee for switching beneficiaries as long as your family member uses the money for qualified education expenses.
• Share the wealth. If your siblings have student loans to repay, you can use up to $10,000 per sibling to help them pay down their balances.
• Save for your retirement. NC 529 Plan beneficiaries can roll over up to $35,000 of their unused funds into a Roth IRA. That means education savings can turn into retirement savings. Check with your CPA or financial advisor and review our FAQ page to navigate the rules and regulations associated with this great benefit.

Choose the option that works best for you (or your family)

Whether it’s a trade school, community college, or a four-year university, any form of education after high school can put you or your child on the path to success.

Now that you know the NC 529 plan can be used for trade schools, as well as traditional colleges and universities, what are you waiting for? Create an NC 529 Account now and start building funds for whatever the future holds.