As another school year winds down, many families are focused on graduation parties, summer camps and the logistics of the next academic year.
But summer can also be an ideal time to step back and reassess how you’re funding your family’s education, before fall tuition bills, enrollment decisions and financial aid deadlines arrive.
For many households, that means taking a fresh look at 529 plans — accounts that have quietly become far more flexible and valuable than many parents realize.
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For years, 529 plans were viewed primarily as college savings vehicles. Parents or grandparents contributed over time, invested the funds and planned for the balance to cover future tuition expenses.
That function is still at the core of many 529 strategies, but recent legislative changes have significantly expanded how these accounts can be used.
The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, expanded how families can use 529 assets. Beginning in 2026, another important change took effect: The annual federal limit for qualified K-12 expenses increased from $10,000 to $20,000 per beneficiary.
That is a meaningful shift for families with children in private school, students who need tutoring or academic support or households thinking more broadly about how education planning fits into their long-term financial plan.
529 plans are no longer just about college tuition
One of the biggest misconceptions surrounding 529 plans is that they can only be used for college tuition.
Under the expanded rules, 529 funds can now be used for a broader range of K-12 education expenses, including tuition, curriculum materials, books, instructional supplies, tutoring, standardized testing fees, dual-enrollment costs and certain educational therapies for students with disabilities.
That flexibility can be especially relevant during the summer. This is often when families are reviewing report cards, evaluating tutoring needs and planning enrichment programs.
However, families should understand that not every education-related expense will qualify, and state tax treatment can vary. Before taking distributions, investors should review their state’s rules and may benefit from consulting a tax adviser. But the broader message is clear: 529 plans have evolved into more versatile education funding tools.
Why families should rethink ‘overfunding’ concerns
Historically, many families were cautious about contributing too aggressively to 529 plans because they feared ending up with excess balances if a child received scholarships, attended a less expensive school or chose not to attend college altogether.
Those concerns have not disappeared, but they have become less restrictive in recent years.
One reason is the expanded list of qualified education expenses. Another is the ability to roll unused 529 assets into a Roth IRA for the beneficiary if certain requirements are met. Current rules allow up to $35,000 to be rolled into a Roth IRA over time, provided the 529 account has generally been open for at least 15 years and other contribution rules were satisfied.
The planning implications are significant. In some cases, a 529 plan can now support a child not only through school, but potentially into early adulthood and saving for retirement as well.
That shift is changing the tone of conversations many advisers are having with families. In the past, clients often aimed to fund only a portion of expected education costs because they worried about excess balances. Today, for families with the cash flow and balance sheets to support it, we are discussing whether it makes sense to fund more aggressively.
Unused dollars may support another family member, help with qualified education expenses earlier than college or, in some cases, begin building a Roth IRA foundation for the child.
In that sense, the 529 has evolved from a narrowly focused college account into more of a long-term family planning tool.
Start earlier than you think — and review your state plan
If there is one consistent takeaway for young families, it is to start early.
The value of a 529 plan comes largely from tax-advantaged growth over time. The longer the money is invested, the more valuable that potential growth can become. Starting early may also matter for families who eventually want to preserve the option of a Roth IRA rollover, since the account-age requirement is generally 15 years.
Families should also periodically review which state plan they are using. Many investors default to their home state’s 529 plan, and that often makes sense if the state offers an income tax deduction or credit.
However, many families do not realize they are not always limited to their own state’s plan.
Some states, including Pennsylvania, for example, allow residents to receive a tax deduction even when investing through another state’s 529 plan. Other states, including Georgia, require residents to use the in-state plan to receive the tax benefit.
That distinction matters because 529 plans can vary significantly in fees, investment options and usability. Certain plans, such as Utah’s my529 program, are viewed favorably by advisers because of their low costs and broad investment selection.
For some families, it may even make sense to split contributions between multiple state plans — using one to maximize state tax benefits while directing additional savings to another plan with stronger investment features.
Do not ignore FAFSA or scholarship applications
Summer is also a good time to revisit financial aid planning. The federal FAFSA deadline for the 2025-2026 academic year is June 30, 2026, and families should pay close attention to school and state deadlines, which may come earlier.
Even families who assume they will not qualify for need-based aid should not automatically skip the FAFSA. Some merit scholarships, institutional aid programs or other opportunities may require it.
Scholarships also create additional 529 planning opportunities. If a student receives a scholarship, families may generally withdraw up to the scholarship amount from a 529 without paying the usual 10% penalty on earnings, although income tax may still apply to the earnings portion.
As summer begins, families may want to take time to review whether their current 529 strategy still reflects how these accounts can now be used. Between expanded K-12 flexibility, Roth IRA rollover opportunities and evolving state-plan considerations, many households may have more planning options than they realize.
