As backpacks get packed and tuition bills arrive, 2025 is delivering more than just class schedules and school supply lists- it’s bringing major changes to how families plan and pay for education.
FAFSA: Recent Changes, Higher Need to Plan Ahead
The FAFSA (Free Application for Federal Student Aid) has been redesigned to be more user-friendly, but the changes go deeper than just layout:
- Fewer Questions, More Automation: The FAFSA form now pulls tax data directly from the IRS, reducing manual entry but increasing reliance on accurate tax filings.
- New Aid Formula: The Expected Family Contribution (EFC) has been replaced by the Student Aid Index (SAI). While both serve as a measure of a family’s ability to pay for college, the SAI introduces several key differences:
- The SAI can be negative, which may increase eligibility for need-based aid.
- The FAFSA no longer divides the SAI among siblings in college. Previously, having two children in school at the same time could double aid eligibility. That benefit is now gone, which may significantly reduce aid for middle-income families with multiple students enrolled simultaneously.
- The SAI places greater emphasis on adjusted gross income (AGI), and less on discretionary income, which may penalize families with high but variable earnings. If your income varies year to year, it’s more important than ever to plan ahead and consider tax planning strategies to manage AGI.
- 2026-2027 FAFSA Timeline: The FAFSA for the 2026–2027 academic year will be available to all applicants starting October 1, 2025.
Families should revisit their FAFSA strategy annually and begin planning early for future years.
529 Plans: More Flexibility, More Power
The One Big Beautiful Bill (OBBBA) has expanded the utility of 529 Plans, making them a more powerful tool for education and long-term planning:
- Expanded Uses: Funds can now be used for:
- Increased K–12 tuition limit from $10,000 to $20,000 per year
- Student loan repayment (up to $10,000 lifetime per beneficiary)
- Continuing education, certification programs, testing fees, credentialing expenses
- ABLE account rollovers: Previously set to expire in 2025, the legislation removed the expiration date, allowing rollovers beyond 2025
With expanded eligibility for K–12 tuition, student loan repayment, and continuing education, 529 Plans now support a broader range of learning paths. Whether your child is pursuing college, certifications, or career training, these changes make it easier to align your savings with evolving educational goals.
Student Loans: New Limitations, More Planning Needed
As part of the One Big Beautiful Bill (OBBBA), sweeping changes to federal student loan limits will take effect starting July 1, 2026.
- New Federal Loan Cap: The federal government is capping total borrowing for traditional dependent undergraduate students and their parents at $92,000 combined:
- Student Cap: $27,000 total over four years
- Parent PLUS Cap: $65,000 total over four years
- Annual Limits Apply: In addition to the lifetime cap, there are annual borrowing limits. These limits apply regardless of the school’s cost, meaning families attending higher-cost institutions may face funding gaps.
- Private Loan Shift: With federal limits in place, more families will need to consider private loans, which require credit checks, underwriting, and formal debt planning.
Families should build a formal debt strategy early, especially if graduate school is part of the plan.
What Should You Do?
- Review Your FAFSA Strategy: Don’t assume last year’s approach will work this year.
- Revisit Your 529 Plan: Make sure it aligns with your child’s current and future education goals.
- Create a Debt Plan: With new loan limits, families need a formal strategy for funding college.
At Boyum Wealth Architects, we specialize in integrating education planning into your broader financial strategy. Whether you’re saving for a newborn or sending your last child off to college, we’re here to help you make smart, tax-efficient decisions. If you have any questions, please don’t hesitate to reach out to a member of our team for further discussion.