Say you have a daughter, and you saved towards her 529 plan over the past 15 years. She recently turned 18, and she decided against a 4-year college degree program. Instead, she thinks culinary school sounds great. Good news - her 529 funds can still be applied towards culinary school.
That’s not the only example of a 529 plan’s versatility. Imagine your sixteen year-old son, for instance - he’s just not sure what to do. He graduates high school, takes a gap year, then starts some vocational training at your local community college. The 529 plan has that covered as well! These college funds are flexible and can be used with a number of learning tracks.
Here is a list of all types of schools that qualify for a 529 plan.
Traditional Four Year University Programs
A 529 plan covers tuition for in-state, out of state, and international universities (as long as they are approved for United States federal aid). In addition, it pays for room and board, meal plans, supplies, computers, tech service, special needs equipment, and books. The benefits include both public and private universities.
Also, it secures off-campus funds. Basically, having a 529 plan for undergrad and grad school takes care of the cost of living in general. The plan eliminates financial struggle and stress when you’re off at school, and it even assists with studying abroad.
Vocational and Trade Schools
As mentioned above, 529 plans are not just for 4-year colleges. If a student desires to focus on a vocational career path, 529 plans can help. Many types of trade schools are covered by 529 plans — culinary, cosmetology, construction, carpentry, wielding, plumbing, electrical, and more.
529 plans can also help you with the costs of technical universities. The cost of technical college ranges from $10,000 to $18,000. In California, the average is around $16,000. These aren’t as pricey as private schools by any means, but they are certainly worth financially planning for. They can also provide an economically viable alternative to traditional colleges; the average salary for an entry-level trade job is almost $40,000 a year in many vocations. And an entry level construction manager, for instance, can earn $75K per year.
Community College and Online Courses
Community colleges provide an excellent alternative to four year degrees. Many students can only afford to take a few classes at a time, or perhaps you are juggling work, family, and school responsibilities. Whether you are trying to earn a bachelor's degree or complete an associates program, you may want to consider community college. The best part is that you can pay for those expenses with your 529 plan.
You can also use your 529 to pay for online courses, and your computer, printer, scanner, computer software, and internet can all be included as eligible expenses. The only exception is that the funds in a 529 cannot be used to pay for room and board if you are not a full time student - but if you are attending community college, you will probably not need to pay for a dorm.
Elementary or Secondary School Tuition
Recently, 529 plan regulations were changed so that families can use the funds for K-12 schools. Parents can now apply $10,000 towards kindergarten, elementary, and secondary public, private, and religious schools. Private schools aren’t the only ones to qualify, but a 529 is most commonly used for them because of high tuition rates.
The disadvantage of using a 529 for grade and secondary school is the fact you’ll be withdrawing your money sooner, and as a result, there won’t be as much time for the interest to compound. Those extra years can add a significant cushion to your college savings, so if you do choose to use a 529 plan for pre college pursuits, tread carefully. You are in control of your 529 plan, however, so you can use the funds as you see fit.
529 plan usage is a bit more strict for elementary and secondary schools. Parents must only use the funds for tuition; the plan doesn’t assist with summer camps, field trips, computers, and other expenses. But you can certainly cash out the 529 plan into a checking account (although you will have to pay taxes on the capital gains), and use those funds for extraneous expenses.
Homeschooling expenses can be paid for through 529 funds in the following states: Alaska, California, Illinois, Indiana, Kansas, Nebraska, and Texas.
Conclusion
While you can’t use a 529 plan to pay for personal expenses, most of the costs associated with university, trade school, community college, or grade school are covered by a 529 plan. Remember that the more time you give a 529 plan to mature, the better your earning will be - even if you cease to make monthly or annual contributions. To get started with a 529 college savings account that you, your friends, and family can contribute to easily, download the Sootchy app today.
