More options for education savings

Expanded 529 plan benefits will make it easier to invest in your children or grandchildren’s future.

Giving the gift of education, whether to a child or grandchild, can have a lasting impact. Legislation known as the One Big Beautiful Bill Act, signed in July 2025, included multiple provisions that will impact the ways families can save for education. Among the major changes are those to 529 savings plans, with several expansions to the ways these plans can be used to cover education costs. The law expanded qualified expenses particularly for K-12 education, increased the annual amount that can be used for these expenses, and expanded their use for workforce training. 

What is a 529 plan?

A 529 plan is a popular savings vehicle that can be established for anyone, but is most
often used by parents and grandparents interested in saving for their children’s or grandchildren’s education. These plans provide tax-deferred savings and tax-free withdrawal of funds used for education. While 529 plans are often thought of as college savings plans, they can also be used for certain K-12 expenses as well as vocational programs, though some states may tax K-12 distributions at the state level.

A 529 plan generally offers a set of investment portfolios that are allocated among stocks, bonds, mutual funds, CDs and money market instruments. Typically, the program will offer at least one age-based or enrollment date portfolio and several static portfolios. This asset allocation is generally more aggressive for younger beneficiaries and less aggressive for those nearing college age.

There are various tax-related benefits to 529 plans. For example, contributions to a 529 plan are considered completed gifts for federal gift and estate tax purposes and may be excludable from your taxable estate. You can generally contribute more without gift-tax consequences early in the life of the account. There are often state tax benefits as well, though these will vary by state. 

Expansions to 529 plans

The limit on K-12 qualified expenses increased from $10,000 to $20,000 per year. Additional expenses beyond tuition now also qualify at the K-12 level, including instructional materials (both hard copy and online), tuition for tutoring or educational classes outside of school, fees for dual enrollment at an institution of higher education, standardized test fees, and educational therapies for students with disabilities (such as occupational or speech therapy). The law also permanently allows rollovers from a 529 plan to an ABLE account, which is a tax-advantaged savings account for individuals with disabilities.

Additionally, the law broadened the list of qualified 529 plan expenses for workforce credentialing programs to include tuition, fees, books and expenses. This includes programs that may not have fit under the previous vocational or apprenticeship allowed use cases. To check if your specific expense qualifies, you can consult with your 529 plan administrator or a tax professional.

Changes beyond 529 plans

Other key changes include new borrowing limits for students and parents under federal loan programs, streamlined student loan repayment plans, stricter rules on the ability of borrowers to pause student loan repayment, and an increased endowment tax on wealthy colleges and universities, among other items.

Next steps

A 529 plan can be an effective way to save money for a child’s or grandchild’s education. Reviewing the changes to 529 plans and the expanded ways they can be used can help you make an impact for your loved ones and give them a great head start by limiting their student loan debt.

529 plans come with fees and expenses, and there is a risk they may lose money or underperform. Most states offer their own 529 programs, which may provide benefits exclusively for their residents. Please consider whether the state plan offers any tax or other benefits. Tax implications can vary significantly from state to state. Investing involves risk and you may incur a profit or  loss regardless of strategy selected. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.