Nebraska lawmakers are debating a new bill that would let parents use more of their children's college savings plan money for a wider range of education expenses, from K-12 programs to job training.
What the Bill Would Do
The proposal focuses on Nebraska's NEST 529 college savings program, which currently lets families save with state income tax advantages for higher education costs.
Under federal rules, 529 plans can already be used tax-free for colleges, universities, community colleges, trade and vocational schools, and registered apprenticeships. Nebraska's bill seeks to align more closely with recent federal changes by expanding how these funds can be spent without tax penalties, according to 1011 NOW.
Lawmakers are considering allowing parents to tap 529 savings for certain K-12 education expenses, including private school tuition and some learning services. The bill would also reaffirm that families can use the money for job training and trade schools, reflecting a broader view of post–high school education.
Supporters say this flexibility would help families respond to changing education needs, such as skills programs that do not follow the traditional four-year college path.
Current Rules and Recent Changes
Nebraska's NEST 529 program has been in place since 2001 and now holds about $8 billion across more than 300,000 accounts, underscoring its role in family financial planning.
Contributions can qualify for a state income tax deduction of up to $10,000 a year for most filers, and investment earnings grow tax-deferred. When used for qualified education costs, withdrawals are free from federal and Nebraska income tax, making NEST 529 a key savings tool for many households.
In recent years, Congress has expanded what counts as a qualified 529 expense, adding options like student loan repayment and registered apprenticeship programs.
Federal changes also broadened K-12 uses, allowing funds to cover not only tuition but tutoring, curriculum materials, test fees, and certain educational therapies. However, states must decide whether to fully adopt these options, and Nebraska law still treats some federal K-12 uses differently for state tax purposes, Saving for College reported.
Arguments For and Against
Backers of the Nebraska bill argue that parents deserve more control over how to use money they set aside for their children's education. They say flexibility can prevent families from being "locked in" to a four-year college path and may reduce pressure to borrow for alternative programs.
They also point to the Meadowlark Act, which automatically opens small NEST 529 accounts for Nebraska newborns, as evidence that the state is committed to broadening access to education savings.
Critics, including some education advocates, have previously warned that expanding 529 use to private K-12 tuition can shift public resources away from traditional public schools.
They worry that higher-income families are most likely to benefit from added tax breaks tied to private options. As debate continues in Lincoln, the bill's sponsors hope to move it forward this session, while opponents push for safeguards to protect public education funding, as per Corporate Vanguard.
