My family invested in a 529 savings plan for my nephew’s college fund. He decided to go to flight school. I understand that flight school if not consider continuing education. He is 21, decided to be a pilot, and the plan penalizes him by $5000.00. That seems unfair. How would I go about getting a waiver or lobbying to change this policy.
Please explain what you mean by “the plan penalizes him $5000”
A 529 plan can be used for another college bound student.
@BelknapPoint any thoughts?
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So not through a university professional pilot program ?
There’s legislation pending that may help.
You can also move money into a Roth IRA next year, up to $35k, $6500 at a time.
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A 529 can be used for a vocational school. I would think that flight school meets that definition. Check with the flight school before going to red alert. If it turns out that you want to lobby (as far as I know, there are no 529 “waivers”), contact your congressional representatives.
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There are some standards that must be met. Perhaps that particular flight school was ineligible.
"What Makes an Institution Ineligible for 529 Funds?
Since most post-high-school education options are classified as eligible, you may wonder what could classify an institution as ineligible. There are multiple reasons why an educational institution could be ineligible. Several conditions must be met to retain eligibility."
Link to check for federal school code:
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It would require an act of Congress and there are tens if not hundreds of millions in lobbying by major institutions already.
As others noted, vocational schools are eligible if they meet basic requirements. Probably worth checking to see if the flight school is eligible and if not, why not, and if there is another nearby that is.
And there’s a point to the penalties. The plans allow people to not pay taxes on investment growth. If people could take it out for any reason it would just be a basic tax dodge. It’s similar to 401Ks or IRAs that penalize for non-qualified early withdrawals. Only those are tax deferrals whereas a 529 is full tax avoidance. Over 40% of the balance of my youngest son’s account is tax free interest.
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My youngest had/has a 58% earnings component to the account. Definitely overfunded, so the new Roth IRA conversion option is very welcome. Investment choice played a part, but time in the market is by far the most important element. To be clear, nobody is complaining- this is a nice problem to have.
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Why not encourage the student to apply to the flight schools which ARE eligible? A LOT easier than lobbying for a legislative change which could take years. Just change the list… voila, problem solved.
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