More options for education savings

More
options for education savings

Family
& Lifestyle

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.

Pendle Hill
Advisors is proud to contribute to the Montgomery County News with our weekly
curated financial news and topics. If you have any questions about the markets,
your financial plan, or anything, please feel free to reach out to our office
for a no cost initial consultation.

Kent Pendleton, AAMS®

Financial Advisor, RJFS

Pendle Hill Advisors LLC

14375 Liberty St, Ste 109 | Montgomery,
TX 77356

T 936-297-8267

Kent.Pendleton@raymondjames.com | www.raymondjames.com/pendlehilladvisors

Material
created by Raymond James for use by its advisors. Securities offered
through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment
advisory services are offered through Raymond James Financial Services
Advisors, Inc. Pendle Hill Advisors is not registered broker dealers and is
independent of Raymond James Financial Services.

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.