529 Flexibility for Trade and Vocational Schools
By: South Carolina State Treasurer Curtis Loftis, Administrator of Future Scholar College Savings Plan
Chances are, if you ask a group of children what they would like to be when they grow up, you’ll get a wide variety of answers. One child wants to become a teacher. Another dreams of being a firefighter - or a baseball player – or both. Over the years, their answers may change many times. Whatever career path they ultimately choose to pursue, their parents and grandparents want them to have the education that will help them achieve their dreams. That’s why families often save for their child’s future with the help of a 529 plan.
As State Treasurer, I’ve had the privilege of helping thousands of families save for their children’s future education with South Carolina’s Future Scholar 529 Plan. Families appreciate that 529 plans offer the flexibility to allow their children choices. Students may opt to attend a traditional four-year university, or they may select a much more direct path to beginning their careers.
Vocational, technical and trade schools
In addition to the many eligible four-year public and private colleges throughout the United States and in many other countries, 529 funds can also be used at eligible vocational, technical or trade schools. The career-focused training these schools offer allows graduates to apply for skilled trade jobs. Because academic programs at trade schools are more hands-on and practical rather than expansive and theoretical, students can often complete their course work in half the time they would need to obtain a degree from a college or university.
At trade schools, students can choose from an almost endless list of career choices and use their 529 funds for qualified programs in areas such as cosmetology, HVAC training, massage therapy, dental hygiene, plumbing, IT training, medical assistant training, electrical, criminal justice, automobile repair, carpentry, culinary school and many more.
Experts say that many Gen Z students view trade schools as a faster path to entrepreneurship. Others cite higher pay and new technology in trade professions as motivation to seek a technical education. These students aren’t alone. The National Student Clearinghouse reports that enrollment in trade schools grew 16% in 2023.
Degrees in demand
Students who choose to attend a trade school are likely to be entering a job market that needs them. A 2024 report by Deloitte and The Manufacturing Institute found that U.S. manufacturing is projected to need 3.8 million new employees by 2033. Fast-growing careers include machinists, welders, semi-conductor processing technicians, statisticians, data scientists, logisticians, computer and information systems managers, as well as software developers and industrial maintenance technicians.
And trade school graduates are often paid more. A 2023 ADP study as reported in The Wall Street Journal found that the median pay for new construction employees entering the workforce rose 5.1% to $48,089. On the other hand, new professional services employees earned an annual $39,520. For the fourth year in a row, new construction hires were earning more than newly hired professionals, such as accountants.
Apprenticeships
The SECURE (Setting Every Community Up for Retirement Enhancement) Act of 2019 allowed families who save with 529 plans even more flexibility. Students are now able to tap their 529 funds to pay for apprenticeship programs registered with the U.S. Labor Department. In addition to fees and tuition, 529 funds can be used to pay for tools and equipment, such as required computer software or hardware, welding equipment, healthcare instruments, safety gear or construction tools needed to enroll in registered apprenticeship programs.
529 equals important flexibility
In the three decades since they were first introduced, 529 plans have become remarkably user-friendly and flexible. New laws allow unused funds in 529 accounts open for a minimum of 15 years to be rolled into a Roth IRA for the beneficiary (limitations apply). Additionally, a lifetime limit of $10,000 in 529 funds may be used to repay an individual beneficiary’s student loan. Also, parents may use up to $10,000 of 529 funds annually to pay for a child’s kindergarten through 12th grade private school tuition.
Families often choose to save with a Future Scholar 529 plan because of the tax benefits. They appreciate that 529 earnings grow tax-free, and their withdrawals for qualified education expenses are also free from taxes. While many states offer tax deductions for contributions to a 529 account, South Carolinians who save with our state’s Future Scholar 529 Plan can deduct 100% of their contributions from their state tax returns.
These tax savings are important benefits - and so are the options and possibilities these plans provide. Saving with a 529 plan offers a child the flexibility to choose the educational path that best aligns with their career goals. Whether that path is a four-year college, a vocational school, an apprenticeship, an online course or a graduate degree, a 529 plan can help them follow their dreams.
