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New tax and spending legislation recently signed into law by President Trump brings major changes to how families save, spend, and plan for their children. Whether you’re raising kids, saving for college, or managing student loans, here are 4 key updates that could impact your finances.
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To help promote long-term financial security, the new law establishes federally backed investment accounts for every American baby born after December 31, 2024 and before January 1, 2029. The rules take effect beginning in 2026.
Key features:
What this means for you: It may be too soon to tell. There’s more to come in the future as the concept evolves. Want to explore more ways to save for a child’s future? Check out our guide to Saving & Investing for a Child, including custodial accounts, IRAs, 529 plans, ABLE accounts, and more.
Things to keep in mind:
The Child Tax Credit (CTC) received a few important changes that could affect how much families receive at tax time.
What this means for you: The permanently higher income thresholds may help middle- and upper-middle-income families benefit from the credit unless their income crosses the threshold.
Families saving for education will welcome the expanded use of 529 savings plans under the recently passed federal legislation, which now allows 529 payments for an even broader range of educational needs. Per federal law, 529 plans may be used to pay for additional costs related to K-12 education (such as qualifying tutoring services, fees for AP tests, and qualifying educational therapies) and for tuition, fees, books, supplies, and equipment required for the enrollment or attendance in a recognized postsecondary credential program. Accordingly, families with various K-12 related expenses and families with children seeking certain post-secondary education different from traditional college can now all benefit from the tax savings of a 529 plan. Additionally, beginning January 1, 2026, the aggregate of expenses in connection with enrollment or attendance at public, private, and religious elementary and secondary educational institutions will increase to $20,000 per calendar year (from all accounts established for the same beneficiary).
Contribution rules:
Though states were encouraged to align with the new law, families should check with their state’s 529 plan administrator to confirm which expenses qualify for state tax benefits.
What this means for you: The new law opens the door to more flexible, inclusive education savings—but it’s still up to families to understand how their state’s rules apply. Be aware that a withdrawal considered tax-free federally might still be taxable at the state level if your state hasn’t adopted the new federal definitions.
The new law introduces sweeping changes to federal student aid and loan programs—changes that could significantly affect how students qualify for aid, how much they can borrow, and how they repay their loans.
What to know about borrowing: Aid eligibility tightened
New loan limits effective July 1, 2026
Federal Direct Loans now have borrowing caps tied to the median cost of the program minus Pell Grants.
The goal is to reduce over-borrowing, but this may limit access for students who rely heavily on federal loans to cover tuition and living expenses.
Managing student debt: Repayment plans overhauled
The law eliminates several existing income-driven repayment (IDR) plans, including SAVE, PAYE, and ICR.
Starting July 1, 2026, new borrowers will choose between:
Current borrowers must transition to the Standard Plan or the RAP.
Deferment and forbearance restricted
Beginning July 1, 2027, new federal loans disbursed on or after July 1, 2027 will no longer qualify for:
Loan rehabilitation expanded
For borrowers in default, the new budget reconciliation act allows borrowers to go through loan rehabilitation twice per loan, instead of once as currently allowed.
What this means for you: If you or your child are planning to borrow for college, it’s more important than ever to understand the new rules:
What to consider:
Some changes in the new tax law may offer families and friends more opportunities to save for the children in their lives—as well as greater growth potential, flexibility, and simplicity. Others may reduce benefits or limit access to student aid. Now is a great time to review your financial plan and consider adjusting your strategy to address the new rules.
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This information is intended to be educational and is not tailored to the investment needs of any specific investor.
Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.
The information provided here is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, customers should be strongly encouraged to consult their tax advisor before opening an HSA. Customers are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS Web site at www.IRS.gov. They can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses (including the Health Coverage Tax Credit),online, or you can call the IRS to request a copy of each at 800.829.3676.
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