H.R. 1 (also known as The One Big Beautiful Bill Act) makes several important updates to how families save and pay for education. These changes will reshape financial aid calculations, borrowing limits, and 529 plan flexibility in the years ahead. Understanding these provisions now can help students and parents plan ahead with confidence.
Financial Aid Changes
Beginning with the 2026-2027 school year, family-owned small businesses and farms will once again be exempt from FAFSA calculations. This means that families whose assets are tied up in their business or land will not see those values count against their eligibility for federal aid – a major benefit for many Vermont families and small business owners.
Several loan programs and borrowing limits are also changing:
Parent PLUS loans will be limited to $20,000 per year and $65,000 total per student (effective July 1, 2026).
Graduate PLUS loans will be eliminated starting the same date.
Graduate student loans will be capped at $20,500 per year, with a lifetime federal loan limit of $257,500.
In addition, starting July 1, 2028, the Department of Education plans to roll out simplified repayment options – reducing the number of available plans, but aiming to make repayment easier to navigate.
529 Plan Expansion
For families saving through 529 education savings plans, the bill significantly expands what counts as a qualified educational expense.
Starting July 5, 2025, 529 funds can be used for:
Post-secondary licensing and credentialing expenses, including expenses for CPA, bar, or commercial driver’s license exams.
Apprenticeship programs and continuing education courses.
Credentialing programs for members of the armed forces.
For K-12 students, the list of eligible expenses is also expanding. It will include:
Books, curriculum materials, and tutoring.
Fees for standardized tests, AP exams, and admissions tests.
Dual-enrollment fees.
Educational therapies, such as occupational, physical, behavioral, or speech therapy.
Additionally, the annual withdrawal limit for K-12 expenses will double to $20,000 (from $10,000). But take note: some states may tax K-12 distributions, so it’s important to confirm with your tax advisor before making withdrawals.
Planning Ahead
While these updates aim to make education financing more flexible and transparent, they also bring new limits and complexities. Parents and students should review how these changes could affect their borrowing plans, repayment options, and long-term savings strategies – especially those currently using PLUS loans or planning to fund graduate study.
Our team is here to help you understand how these updates may affect your education and financial plans. Reach out today to learn more about how H.R.1 could shape your family’s approach to saving, borrowing, and paying for school.