Revive vocational vigor via college savings plan expansion

During the just-concluded “workforce development week,” President Donald Trump — who ironically hosted the reality television show “The Apprentice” — pushed for apprenticeships and job training as solutions to close skill gaps among American workers.

The White House gave directives to remove regulatory obstacles to executive actions promoting apprenticeships and “connect job seekers with executives.” Thursday, the administration announced plans to repurpose federal funds to double the amount of federal funding for apprenticeship programs. 

{mosads}Easing regulations is nice and one hopes repurposing taxpayer dollars will lead to efficiencies, but the Trump administration should give taxpayers better access to their own savings to help young adults access vocational programs. A better solution is closer than the administration may realize.

Earlier this year, Trump told a meeting of U.S. and German business leaders that apprenticeships and similar job training programs can be “an alternative to a four-year degree.” True, a four-year college isn’t for everyone, but expanding the uses of federal college savings plans could be the key to helping young adults with their career goals.

A 529 college savings plan is an effective way to save for college tuition, books, room and board, computers and other devices. The list of eligible expenses ends here, though, and once a student finishes college, any remaining funds cannot be withdrawn without a penalty, unless a student attends graduate school or the money is transferred to another beneficiary.

According to the Investment Company Institute, families across the U.S. hold assets worth approximately $251 billion in 529 plans. Funds deposited in a 529 account grow tax free as long as the money is used for postsecondary expenses. Both state and federal lawmakers have demonstrated support for these accounts in recent years.

In 2015, President Barack Obama signed a bill expanding the uses of the accounts to include computer hardware. Meanwhile, more than 30 states and Washington, D.C. offer state tax advantages to individuals that contribute to these plans; Minnesota lawmakers enacted this benefit just last week. 

At the same time, New York Federal Reserve research finds that nearly half of recent graduates (46 percent) are underemployed. This figure has seen only a small improvement since the 1990s. Washington could work to change this figure without new federal outlays by giving 529 account holders more options over how to use their own savings.

To make the pursuit of apprenticeships more attractive, the Trump administration should work with Congress to expand the list of eligible 529 expenses to include fees incurred while participating in job training or apprenticeship programs, including certificates earned while studying online. This way, families would have more access to their own savings and be able to help young adults pursue a college degree, enter the workforce, or work to earn a promotion.

Additionally, federal lawmakers should take steps to turn 529 accounts into Lifelong Learning Accounts by allowing families to save personal funds to pay for pre-kindergarten and K-12 expenses, as well as college and job training costs.

Public funding for services like education and unemployment benefits will be increasingly stretched in the coming years as healthcare expenses and Social Security consume more of federal and state budgets. Families should have more ways to use their own savings to help their children find quality educational opportunities and prepare for ever-changing workforce needs.

Earlier this year, President Trump praised Germany’s success with state-funded job training and called that nation a “model” for apprenticeship programs. Organisation for Economic Cooperation and Development data find that Germany’s unemployment rate for individuals aged 15-24 is 7 percent, while the same figure for youth in the U.S. hovers between 10 and 12 percent.

Yet, each German apprenticeship costs between $25,000 and $80,000. While U.S. Department of Labor figures find that 91 percent of apprentices land a job and the average starting salary is $60,000, the costs of such training in the U.S. can run as high as $250,000 per individual — not including start-up costs.

Instead of asking taxpayers to cover these expenses — along with their personal savings and investments — Washington should simply give individuals more flexibility with their own savings. Expanding 529 plans is a great way to start.

Jonathan Butcher is education director at the Goldwater Institute, a conservative and libertarian public policy think tank. He is a senior fellow at the Beacon Center of Tennessee, a free-market think tank. 

The views expressed by contributors are their own and not the views of The Hill.