How the Big Beautiful Bill Affects Student Savings
OBBBA expanded 529 plan uses, made ABLE provisions permanent, and introduced Trump Accounts. Here’s what you need to know.
Key Takeaways
- Education savings gained flexibility all around. Expanded 529 eligibility means families can use the tax-advantaged accounts for more K-12 expenses, professional licenses, certifications, and continuing education.
- New and expanded savings vehicles build lifelong wealth. Permanent ABLE accounts provide long-term support for individuals with disabilities, while new Trump Accounts introduce another way for families to fund a child’s future.
- Saving matters more than ever, but access remains uneven. While these changes are good news for those who can afford to save, they don't address the barriers faced by families living paycheck to paycheck. Support like employer benefits and crowdfunding can make education savings more accessible for everyone.
This article was originally posted to Paidly CEO John Scully’s LinkedIn on August 7th, 2025.
The One Big Beautiful Bill Act (OBBBA) became law on July 4th, 2025 and brought major changes for future, current, and former students.
We‘ve looked at how the bill affects student borrowers. Let’s get into the four major changes to student savings.
How the One Big Beautiful Bill Act Affects Student Savings
1. Expanded 529 use during K-12
529 educational savings plan usage during K-12 was expanded to include more eligible expenses. As of July 4th, 2025, 529 funds can be used on the following elementary, secondary, and homeschool expenses:
- Tuition
- Curriculum and curricular materials
- Books and other instructional materials
- Online educational materials
- Tutoring or educational classes (away from home)
- Nationally standardized achievement tests (SAT and ACT)
- Advanced Placement (AP) exams
- Any examinations related to college or university admissions
- Fees for dual enrollment courses
- Educational therapies for students with disabilities (occupational, behavioral, physical, and speech-language)
The annual withdrawal limit also increased to $20,000 per year (previously $10,000) effective taxable years after December 31st, 2025.
2. Expanded 529 to credentials, licenses, and continuing education
529 also expanded to cover more expenses beyond K-12, specifically for workplace education.
As of July 4th, 2025, 529 funds can also be used on the following post-secondary expenses:
- Credentialing expenses including tuition, fees, books, supplies, and equipment
- Licensing fees including preparation courses, exams, and renewal
- Continuing education
Credentials and licenses must be state or federally recognized to be eligible. Some eligible programs include:
- Skilled trades and vocational programs like CDL, HVAC, welding plumbing, electrical work, and cosmetology
- Professional licenses and certifications like CPA, legal bar, nursing, teaching, real estate, and financial advising
Most qualifying programs are listed in directories for the Workforce Innovation and Opportunity Act (WIOA).
3. Permanent ABLE accounts with 529 rollovers
529A savings plans – often called Achieving a Better Life Experience (ABLE) accounts – were made permanent through the bill (previously set to expire at the end of 2025).
ABLE accounts are tax-advantaged savings for individuals whose disability began before age 26 (expanding to age 46 in 2026). Funds can be used throughout the beneficiary’s life on qualified expenses:
- Education
- Housing
- Transportation
- Employment training and support
- Assistive technology and related services
- Health, medical, and wellness care
- Financial management and legal fees
- End-of-life and other basic living expenses
ABLE accounts can also receive rollovers from 529 plans tax-free.
Contributions cannot exceed the annual gift tax exemption limit ($19,000 in 2025) and will be adjusted for inflation starting taxable years after December 31st, 2025.
For more information on ABLE accounts, see the ABLE National Resource Center.
4. Introduced Trump Accounts
530A Trump Accounts – formerly called Money Accounts for Growth and Advancement (MAGA) – were introduced in the bill and will be available starting July 4th, 2026.
Trump Accounts are child savings that grow tax-deferred and turn into a Traditional Individual Retirement Account (IRA) when the child turns 18.
- Before age 18, funds cannot be withdrawn except to rollover to ABLE accounts
- At age 18, IRA withdrawal rules apply, including tax on withdrawals for education expenses
To be eligible to open an account, children must have US citizenship at birth and both the child and one parent must have social security numbers (SSN).
Children born in 2025 through the end of 2028 will receive a one-time $1,000 deposit to their account upon opening.
Families, individuals, and employers can collectively contribute up to $5,000 per year to a child’s Trump Account (employers can contribute a maximum of $2,500 annually). Contribution limits will be adjusted for inflation starting in 2027.
What You Can Do
Unlike federal student borrowers who were stripped of options in the bill, student savings gained flexibility, allowing more uses for these tax-advantaged accounts.
- Expanded 529 plan eligibility means families can better support children in K-12 and beyond, including those who seek education outside of college and need to maintain credentials in the workforce.
- Permanent ABLE accounts help individuals with disabilities, building financial support that can be used throughout their lives.
- Trump Accounts give an early way to save for retirement, providing a federally-funded $1,000 contribution to newborns for a limited time.
These changes are generally good news for families who can afford to save – but don’t help those who can’t.
All individuals deserve education and the chance to receive it in a financially responsible way. Here’s what you can do in response to these changes:
If you’re saving or want to save… Look into your student savings options and pick one that’s right for the beneficiary. Once you have an account, create a budget to help it grow over time. You can also seek support through crowdfunding with your community and asking for contributions from your employer.
If you’re an employer… Consider starting or expanding your education benefits to support all of your employees and their families. Employees with children are looking to build savings, and with expanded 529 flexibility, even your employees without children can use those funds on maintaining their licensure and completing continuing education courses.
If you know someone who’s saving… Ask if they’re crowdfunding their educational savings and contribute if you can. This is a great option around birthdays, holidays, and other times of celebration. Sometimes the best gift is the financial support your loved one may be embarrassed or unsure how to ask for.
Learn how Paidly can help you start 529 plan benefits and crowdfund student savings.
To read the One Big Beautiful Bill Act yourself, visit http://www.congress.gov/bill/119th-congress/house-bill/1/.
John Scully, CEO
John Scully is a seasoned executive leader with a strong background in business operations and technology. As Co-Founder of Paidly Student Loan Benefits, he empowers employers to enhance talent recruitment and retention through a cloud-based platform that allows tax-free student loan payments. With experience in industries like healthcare and fintech, John has held leadership positions at companies such as Sharp Notions and the University of Rochester Medical Center. Holding an MBA from the University of Rochester and a B.S. from Excelsior College, John is dedicated to helping organizations and individuals navigate the complexities of Fintech, especially student loan payments.
Stay Ahead of the Curve
Get the latest insights on student loan repayment, 529 contributions, and maximizing employer benefits delivered to your inbox.
The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Paidly shall have no liability for the information provided. While care has been taken to produce this document, Paidly does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.
You may also like
How the One Big Beautiful Bill Affects Student Borrowers
OBBBA is reshaping federal student loans through reduced repayment plans, tighter hardship protections, and new borrowing caps. Here’s what you need to know.
The SAVE Plan is Ending. Here’s Why Employers Need to Act.
The end of the SAVE Plan means your most educated employees may be facing hundreds in extra student loan expenses each month. Learn how tax-free benefits can keep them from closing the gap elsewhere.
Child Savings Accounts: Coverdell ESAs vs. 529 Plans vs. Trump Accounts
Trump Accounts offer more flexibility but less tax advantages than 529 plans and Coverdell ESAs. Learn how these child savings options compare so you can pick the best fit for your child’s future.
