Recent changes to education planning law.

A New Repayment System for New Borrowers

Federal loans taken on or after July 1, 2026 may be repaid under only two plans: the new Repayment Assistance Plan or a Tiered Standard schedule. Borrowers whose loans predate that cutoff keep the existing plans, but only until they borrow again. A new Direct loan on or after July 1, 2026, including a consolidation loan, moves everything that borrower holds onto the new plans. ICR and PAYE are closed to new enrollment and sunset on July 1, 2028; borrowers still enrolled will be moved.

Only the Repayment Assistance Plan counts toward Public Service Loan Forgiveness. The Tiered Standard schedule does not, at any balance, and it is where a borrower who never chooses a plan ends up.

Parent PLUS borrowers who consolidated before July 1, 2026 can use income-contingent repayment through June 30, 2028. Those who did not consolidate in time no longer have an income-driven option, and consolidating now can cost them protections they still hold.

Whether your student's loans land before or after July 1, 2026 shapes their options for the life of the debt. And if you already hold federal loans, borrowing again for another child can move the older ones onto the new plans too.

More on borrowing and repayment, on Student Loans.

New Caps on Federal Student Loan Borrowing

Federal law now sets a $257,500 lifetime cap on what a borrower may take out for their own education across Direct, FFEL, and Perkins loans. It applies to borrowers who take out loans on or after July 1, 2026, and under Department of Education guidance earlier federal borrowing counts toward the limit once the new limits apply to you, so it does not start over. Lower aggregate limits still apply first, so most borrowers reach those well before $257,500.

Parent PLUS borrowing sits outside that cap and, for the first time, carries fixed dollar limits of its own: $20,000 a year and $65,000 total per dependent student, across all parents combined, on top of the long-standing cost-of-attendance limit.

The Graduate PLUS loan is eliminated for new borrowers. Direct Loan amounts for students enrolled less than full time in term-based programs are now reduced in proportion to enrollment intensity. Under prior law, a half-time student could borrow the same annual amount as a full-time student.

For a family that assumed federal loans would cover whatever's needed, the ceiling is now fixed. For graduate borrowers, it's much lower than before. Where the gap between cost and the cap is real, the choice is financing it another way or reconsidering the school.

More on borrowing and repayment, on Student Loans.

Trump Accounts

A new tax-deferred account for children under eighteen who are U.S. citizens with a work-authorized Social Security number. Accounts could first be opened on July 4, 2026. Contributions are capped at $5,000 a year in total, and an employer may fund up to $2,500 of that amount rather than adding to it. Funds remain in low-cost, broad U.S. equity index funds until the year the child turns eighteen, and no withdrawals are permitted before then. Starting in the year your child turns eighteen, the account generally follows traditional IRA rules.

A pilot program also provides a one-time $1,000 federal contribution for children born after December 31, 2024 and before January 1, 2029.

A genuinely new option for families with young children. For those in the pilot window, the $1,000 federal contribution only arrives if you open an account. The rules aren't finished (Treasury's regulations remain proposed), so we'll walk you through what's settled and what isn't before recommending one.

529 Funds Go Further Than They Once Did

Three changes widened what a 529 can pay for. The annual cap on tax-free K-12 withdrawals doubled from $10,000 to $20,000 per student on January 1, 2026. Qualifying K-12 expenses expanded beyond tuition as of July 5, 2025, taking in curriculum materials, tutoring, standardized test fees, dual-enrollment tuition, and educational therapies. And postsecondary credentialing programs became qualified expenses, from trades such as welding and CDL training to professional licensure including the CPA and bar examinations.

Registered apprenticeship expenses and up to $10,000 lifetime per borrower in student loan repayment remain qualified as well.

A 529 now covers considerably more for families paying for private K-12, and it no longer takes a four-year degree to make one worth funding.

More on choosing and using a 529, on Education Accounts.

ABLE Eligibility Now Reaches Age 46

The age by which a qualifying disability must have begun rises from 26 to 46, bringing an estimated six million additional people within reach of an ABLE account. Rollovers from a 529 into an ABLE account, the ABLE to Work provision, and Saver’s Credit eligibility for ABLE contributions were also made permanent in 2025.

Many families were told years ago that an ABLE account was not open to them. If you or a family member experienced that, the change in the age limit may make eligibility within reach now, and it's worth checking again.

FAFSA Simplification & the Student Aid Index

The Expected Family Contribution (EFC) was replaced with the Student Aid Index (SAI). The new formula removed the prior discount for families with more than one child in college at the same time, and changed how certain assets are counted.

If you’ll have more than one child in college at once, the discount the old formula gave for that is gone.

Grandparent-Owned 529 Plans No Longer Count Against Aid

Under the prior FAFSA, distributions from a grandparent-owned 529 plan counted as untaxed student income and could reduce aid eligibility. The simplified FAFSA no longer asks about cash support or those distributions at all.

Grandparents can help pay for a grandchild’s education without the old worry that it will cost the student aid on the FAFSA.

529-to-Roth IRA Rollovers

Beneficiaries can roll up to $35,000 of unused 529 plan funds into a Roth IRA over their lifetime. The 529 account must have been open at least 15 years, and the funds being rolled over must have been in the account at least 5 years. Annual rollovers are capped at the beneficiary’s annual Roth IRA contribution limit, and the beneficiary needs earned income for that year.

Leftover 529 money doesn’t have to sit unused or trigger a penalty when a child doesn’t need it all for school, provided the 15-year and 5-year holding rules are met.