When the One Big Beautiful Bill Act (OBBB) was signed into law in July 2025, it brought a sweeping expansion in the permitted uses of 529 plans. The bill absorbed multiple policy recommendations that have now made 529s more flexible, inclusive, and central to a family’s long-term savings strategies for education, including college and beyond. However, the bill has also reshaped federal college financing, placing new limits on how much students and their families can borrow and narrowing the range of available repayment options.1
From expanding qualified expenses to impacts on college financing, here’s what families should know.
Impact on 529 plans
Expanding education beyond the classroom
As of July 4, 2025, the date OBBB was signed into law, families can now use 529 funds to cover the costs of credentialing, licensing, and continuing education programs recognized by the Workforce Innovation and Opportunity Act (WIOA), the Department of Veterans Affairs WEAMS database, or other similar federal or state directories. This opens 529s to a broader set of career pathways beyond college, particularly trade and technical certifications that previously required out-of-pocket spending.2
More flexibility for K-12 expenses
OBBB also strengthened a family’s ability to use 529s to pay for K-12 education. Qualified expenses now include:
- Curriculum materials and tutoring
- Online learning platforms and standardized test fees
- Educational therapies for students with disabilities
- Dual-enrollment tuition for college courses taken in high school
Additionally, starting in 2026, the annual withdrawal cap for K-12 expenses will double, increasing from $10,000 to $20,000 per year. This means more families will be able to use their 529 account to meaningfully support early academic growth and preparation for higher education.3
Permanent coordination with ABLE accounts
Another important update: OBBB permanently extends the ability to roll over funds from a 529 plan into an ABLE account — a major win for families supporting loved ones with disabilities. Previously set to expire at the end of 2025, families can now transfer up to $19,000 per year, the current annual ABLE contribution limit, from a 529 to an ABLE account in the name of the same 529 beneficiary or a family member of the beneficiary. This provides families with much needed long-term flexibility to reallocate education-related funds across different needs.
Impact on student loans and repayment
For decades, families have relied on federal student and parent loans to bridge the gap between their savings and scholarships and the full cost of attendance. OBBB significantly alters the size and scope of the financing safety net for students and their families. As a result, fewer borrowing options remain, making proactive, tax-advantaged savings strategies—like 529 plans—more important than ever for individuals pursuing higher education, for themselves or their loved ones.
Reduced borrowing power
Previously, graduate and professional students could borrow up to their program’s full cost of attendance. With the elimination of Grad PLUS loans under OBBB, these students now face annual and lifetime caps: $20,500 and $100,000 for graduate students, and $50,000 and $200,000 for professional students.
Similarly, Parent PLUS loans will receive a lifetime cap of $65,000, well under the total cost of tuition and room and board at many four-year institutions.
Stricter repayment options
Beginning July 2026, PLUS borrowers will be limited to the standard 10-year repayment plan as popular income-based repayment plans–including Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE), and Income Contingent Repayment (ICR)—are being retired. In their place, borrowers can use a revised Income Based Repayment (IBR) and the new Repayment Assistance Plan (RAP). RAP calculates payments based on the borrower’s adjusted gross income and family size, with any remaining balance forgiven after 30 years of qualifying payments, up from 20-25 years in the sunsetting plans.4
Long-Term implications for 529 plans
These changes and reductions to federal college financing options send a clear message that the government expects families to save more on their own. Families taking advantage of the tax benefits of 529 plans will be better positioned to navigate the new college financing landscape without having to rely heavily on limited federal loans or private borrowing options.
In the wake of OBBB, 529s are more essential than ever for families planning for college. As the bill continues to reshape college financing, those who save early, stay consistent, and fully leverage their 529 plans will be best prepared to meet rising education costs.
1H.R. 1, One Big Beautiful Bill Act. Library of Congress. https://www.congress.gov/bill/119th-congress/house-bill/1
2Trull, J. “Trump’s Budget Bill Lets 529 Plans Cover Credentials and Continuing Education.” Saving for College, July 24, 2025. https://www.savingforcollege.com/article/trump-budget-bill-529-plan-credentials-continuing-education
3Meckler, L., and Douglas-Gabriel, D. “Tax bill also delivered huge education changes.” The Washington Post, July 11, 2025. https://www.washingtonpost.com/education/2025/07/11/student-loans-education-big-beautiful-bill/
4National Association of Student Financial Aid Administrators. “Federal Student Aid Changes from the One Big Beautiful Bill Act.” September 2025. https://www.nasfaa.org/uploads/documents/Federal_Student_Aid_Change_OB3.pdf
