529 Plans Now Cover Trade Schools, Credentialing, and More Under New Federal Law
Credit: Tom Williams / CQ-Roll Call, Inc. / Getty Images- A 529 savings plan is an account anyone over 18 can open — for themselves or for another person — to save and withdraw tax-free funds for select educational expenses.
- The One Big Beautiful Bill Act expanded the savings plan from being used primarily for college. It now can be used for trade school, credentialing, and training expenses.
- Beneficiaries in high school can use their 529 plan for dual enrollment courses, AP tests and other college exams, and tutoring outside of school.
- A 529 plan counts as an asset on the FAFSA, not income — so it does not largely impact a student’s financial aid eligibility.
President Donald Trump signed the 1,000-plus-page One Big Beautiful Bill Act into law on July 4, and it will significantly change how students pay for career-advancing education.
Loans and financial aid eligibility saw more restrictions. At the same time, the massive spending bill opened up tax-free savings through 529 plans for nondegree-seeking programs like trade school, credentialing, and training. 529 plans are savings accounts, similar to retirement accounts, that beneficiaries can use toward qualified education expenses.
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“By expanding 529 plans to more broadly include trade schools, credentialing programs, and workforce training, the law finally aligns college savings with the evolving definition of higher education,” Wayne Weber, CEO and founder of Gift of College, told BestColleges.
“We’re no longer in a one-size-fits-all degree era — families are now empowered to save for pathways that lead to high-paying, in-demand careers, whether that’s through a four-year university or a welding certification program.”
Gift of College is a crowdfunding platform for 529 plans that helps friends, family, and employers contribute and give toward 529 plans.
A 529 plan also only has a small effect on financial aid eligibility and is considered an asset instead of income for the Student Aid Index on the Free Application for Federal Student Aid (FAFSA).
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How the Big Beautiful Bill Impacts 529 Plans
The most significant addition to valid uses for 529 plans are trade school, credentialing, testing, and workforce training. They can also be used for dual enrollment, testing, and tuition for K-12.
Allows Students to Use Funds for Trade Schools, Licensure Programs
Previously, 529 recipients could only use the plan for college expenses or $10,000 per year for K-12 tuition and costs per beneficiary.
The One Big Beautiful Bill law now states that a 529 plan includes “qualified postsecondary credentialing expenses,” including all tuition, fees, books, supplies, and equipment. This means 529 plan beneficiaries can now use those funds for any state-recognized trade school or credential program.
Students can also use the plan for any tests, training, or continuing education courses needed to earn and keep a credential — like a teaching, nursing, or trade license. Students may also apply 529 funds toward an apprenticeship registered with and certified by the secretary of labor.
Eligible credentials:
- Are accredited by the Institute for Credentialing Excellence, National Commission on Certifying Agencies, or American National Standards Institute
- Are included in the Credentialing Opportunities On-Line (COOL) directory of credentialing programs maintained by the Department of Defense or by any branch of the Armed Forces
Allows High Schoolers to Use Funds for College Prep
K-12 guidelines also saw some expansion under the new law. Now, beneficiaries can use their savings for college preparation education, such as Advanced Placement (AP) testing and dual enrollment.
Now, 529 plan beneficiaries who are preparing for college can use their savings toward:
- Tutoring or classes outside of the classroom
- AP tests or other exams related to college
- Dual enrollment courses
Weber believes all these changes will encourage more middle-income families — who may have been uncertain if college was the right or only path — to save early for their children. He said they now know their savings are flexible to support the right education for their child.
“At Gift of College, we’re excited to see 529 plans evolve in a way that supports all learners — whether they’re heading to an Ivy League school, a coding bootcamp, or an HVAC certification,” Weber said.
Other Changes in the One Big Beautiful Bill Law
Another expansion for nondegree-leading programs is the Pell Grant, which is now available to workforce programs as short as eight weeks.
As nondegree programs become more popular and accessible, traditional degree higher education is seeing narrower eligibility requirements.
Some loan changes to federal financial aid include new limits on how much graduate students can borrow per year and a $257,500 lifetime borrowing limit for all students.
College majors and graduate programs will now have to lead to certain salary requirements to qualify for federal student loan disbursements.