This article is provided for informational and educational purposes only and should not be construed as investment, tax, legal, or financial aid advice. The information presented is general in nature and may not apply to your individual circumstances.
Paying for college got harder to plan for on July 1, 2026. New federal borrowing limits took effect, and the one that affects parents most is this: Parent PLUS loans, which used to cover whatever a family couldn’t pay out of pocket, are now capped at $20,000 per year and $65,000 total per child.
If you assumed federal loans would fill whatever gap your savings left behind, that assumption may no longer hold. The four sources that pay for college haven’t changed. What has changed is how much of the bill federal borrowing covers. Here’s what’s worth doing, what’s worth avoiding, and which pieces of common advice deserve a second look.
How Families Pay for College
Almost every family covers the cost with some combination of four things.
Grants and scholarships, meaning money that doesn’t have to be repaid. It comes from the federal government, your state, the college itself, or outside organizations. Aid from the college is often a large share.
Savings, most often in a 529 plan, sometimes in a savings account, a taxable brokerage account, or a custodial account.
Loans, including federal loans in the student’s name, federal Parent PLUS loans in the parent’s name, and private loans from banks and credit unions.
Current income, meaning what you pay from cash flow while the student is enrolled, often through a monthly tuition payment plan the school offers.
The order matters. Grants and scholarships come first, because that money doesn’t have to be paid back. Savings come next. Borrowing should be the last piece you solve for, and families hoping to get through college without loans generally manage it by choosing schools where the first two sources cover most of the bill. Since July 2026, there is also less federal borrowing available to fall back on.
The Dos
File the FAFSA, even if you’re confident you won’t qualify for need-based aid
The 2027-28 FAFSA opened on September 23, 2026, and it uses income from your 2025 tax return. Many higher-income families skip the FAFSA because they assume they won’t qualify for aid. That’s often a mistake.
The FAFSA is the gateway to federal student loans, and many colleges and states require it before they’ll consider a student for merit scholarships or institutional grants. Skipping it can close doors that were never about your income in the first place.
If you expect to have more than one child in college at the same time, there’s a recent change you should know about. The federal aid formula used to give families a break when more than one child was enrolled at once. That adjustment disappeared with the simplified FAFSA, and it hit families with overlapping college years the hardest. Some colleges that use the College Scholarship Service (CSS) Profile still account for siblings in their own institutional aid, so ask each school directly.
Run the net price calculator before anyone falls in love with a school
Almost every college is required to post one. It estimates what your family would actually pay at that specific school, which is usually below the published price.
The gap can be wide. For 2025-26, average published tuition and fees at private nonprofit four-year colleges were $45,000, while the average net tuition and fees paid by first-time full-time students was an estimated $16,910, according to the College Board. At public four-year institutions, average published in-state tuition and fees were $11,950 against estimated average net tuition and fees of $2,300.
Those are national averages, and what your family would pay at a particular school could be higher or lower. The point is to run the calculator for each school on your list rather than assume the published price applies to you.
Understand the new borrowing limits before senior year, not during it
Federal borrowing for an undergraduate now has a fixed dollar limit on how much a family can borrow. A dependent student’s own limits haven’t changed, at $5,500 as a freshman, $6,500 as a sophomore, and $7,500 as a junior and senior, up to $31,000 total. What’s new is the Parent PLUS cap of $20,000 per year and $65,000 per child. Added together, that means the most a family can borrow from the federal government for one student is now a number you can work out ahead of time.
If you took out a Parent PLUS loan before July 1, 2026, you may be able to keep borrowing under the old limits for up to three more years, as long as your student stays in the same school and program. Check with the school’s financial aid office to confirm.
Use a 529 plan, and know what it can do now
A 529 plan grows tax-deferred, and withdrawals for qualified education expenses are free from federal income tax. Pennsylvania and many other states add a state income tax deduction for contributions. Like any investment, a 529 plan can lose value, and withdrawals for non-qualified expenses can trigger taxes and penalties.
Recent law expanded what counts as a qualified education expense. Starting in 2026, families can withdraw up to $20,000 per year for K-12 expenses, double the previous limit, and qualified K-12 costs now reach beyond tuition to items such as curriculum materials, tutoring, and standardized test fees. Certain post-secondary credentialing and licensing programs also qualify, which matters for a student headed toward a trade or a certification rather than a four-year degree.
State tax treatment doesn’t always match federal treatment on the expanded categories, so confirm your state’s rules before taking a withdrawal.
Leftover money is less of a problem than it used to be. Up to $35,000 per beneficiary can be rolled into a Roth IRA over a lifetime, subject to conditions we covered in What SECURE 2.0 Means for Your Retirement Plan in 2026.
Tax rules can be complicated, and they change often. Before putting any of these strategies into action, it’s a good idea to check with a qualified tax advisor about how they apply to your situation.
Bring grandparents into the conversation early
Two provisions make grandparents unusually well positioned to help.
First, distributions from a grandparent-owned 529 plan are no longer reported as student income on the FAFSA. That used to carry a real penalty, and it’s gone. Grandparent-owned 529 assets were never reported on the FAFSA to begin with, though colleges that use the CSS Profile may still ask about them.
Second, tuition paid directly to an educational institution is excluded from gift tax entirely under Section 2503(e), with no dollar limit. That’s separate from the $19,000 annual gift tax exclusion for 2026, so a grandparent can pay tuition directly to the school and still make a $19,000 gift to the same grandchild in the same year. The payment has to go to the institution rather than to the student or the parents, and the exclusion covers tuition only, not room, board, or books.
If grandparents want to help, knowing early means the money gets routed the right way the first time, which is easier than unwinding it later.
The Don'ts
Don’t fund college at the expense of your own retirement
This is the one we’d underline. Your student has options for college that you don’t have for retirement.
A narrow exception lets you take an IRA withdrawal for qualified higher education expenses without the 10% early distribution penalty if you’re under 59½. It’s easy to misread. The exception waives the penalty, not the income tax, and it applies to IRAs only. A withdrawal from a 401(k) or 403(b) for education expenses generally still carries the penalty.
There’s a second effect people miss. Retirement account balances aren’t reported as assets on the FAFSA, but a taxable withdrawal raises your adjusted gross income, and the aid formula uses your income. A withdrawal taken today can reduce aid eligibility two years from now.
Don’t sign a private loan without knowing what you’re giving up
Private loans aren’t automatically the wrong answer, and with Parent PLUS capped, more families will end up considering one. A creditworthy borrower can sometimes find a lower rate than the federal option, particularly compared with PLUS.
For 2026-27, the federal rate is 6.52% for undergraduate Direct loans and 9.07% for PLUS loans, and PLUS loans also carry an origination fee of about 4.2% that is deducted from each disbursement. Compare the rate, but compare the terms too, and read what happens if the borrower loses a job or becomes disabled.
Federal loans still offer protections that private loans often don’t, such as discharge if the borrower dies or becomes permanently disabled. But for parents, the gap is narrower than it used to be. Parent PLUS loans made on or after July 1, 2026, can be repaid only under a standard fixed-payment plan, with no income-driven option. Federal loans in the student’s name still have one. Some options to pause payments are also being scaled back for newer loans.
If you already have Parent PLUS loans on an income-driven plan, be careful. Taking out a new Parent PLUS loan can end that eligibility for your existing loans too.
Don’t wait for the deadline to file
Some state grant programs award money in the order applications arrive, and those funds run out. Institutional aid at many colleges works the same way. Filing in the fall rather than waiting until spring costs you nothing and can matter a great deal.
Don’t treat the first offer as final
If your financial circumstances changed after the tax year the FAFSA used, colleges have a formal process for reviewing that, often called professional judgment or a special circumstances review. Job loss, a business downturn, large medical expenses, and the death of a parent are the kinds of changes the process exists for. You have to ask, in writing, at each school.
Advice You'll Hear That Deserves a Second Look
“Just borrow now and figure out repayment later.” Repayment terms are set when the loan is made. For a parent taking PLUS loans in their late fifties, the repayment period can run well into retirement, which makes it a retirement planning decision as much as a college decision.
“Private colleges are always more expensive.” Sometimes, but not always. Private colleges with large endowments often discount heavily, and a well-funded private school can land below an out-of-state public. Compare net prices at specific schools, not categories.
“Scholarships are only for students with perfect grades.” Merit aid at many colleges depends on how a student compares with that school’s applicant pool rather than on meeting a fixed grade cutoff. The same student can earn a real merit award at one school and little or nothing at another where they sit near the bottom of the admitted class.
“Take whichever school gives the biggest aid package.” Look at what’s inside the package. An offer built largely on loans is a different proposition than one built on grants. Compare what you’d pay out of pocket and what the student would owe at graduation.
Where to Get Help Paying for College
Start with studentaid.gov, which has the official rules on eligibility, loan limits, and deadlines. Each college’s financial aid office is the authority on that school’s own aid and handles special circumstances appeals. For outside scholarships, stay with free nonprofit databases and be skeptical of any service that charges a fee to find scholarships for you.
The Short Version
Three things to take from this. File the FAFSA regardless of income, because it opens doors beyond need-based aid. Find out early what the new borrowing caps will and won’t cover for your family, well before your student is weighing acceptance letters. And keep your own retirement savings off the table, since paying for college has more paths open to it than funding retirement does.
Every family’s situation looks a little different. If you’d like to talk through how these pieces fit together for yours, reach out to our team. We’ll look at your specific circumstances and goals before making any recommendations.
The Bottom Line
Beneficiary designations are easy to overlook, but they’re a foundational part of any estate plan. They control where some of your largest assets go, they bypass your will, and once you’re gone, mistakes can’t be corrected.
The good news is that reviewing them is one of the simpler things you can do for your estate plan. If you’d like a second set of eyes on your estate plan, or want to make sure your designations align with the rest of your goals, reach out to our team and we’ll walk through them with you.
Sources: U.S. Department of Education, Federal Student Aid, “Interest Rates for Federal Direct Loans First Disbursed Between July 1, 2026 and June 30, 2027” (June 2026); published annual and aggregate loan limits, and guidance on repayment plan changes under the One Big Beautiful Bill Act; College Board, Trends in College Pricing and Student Aid 2025 (November 2025); Internal Revenue Service, Revenue Procedure 2025-32 (October 2025) and the education provisions of the One Big Beautiful Bill Act (July 2025). Figures reflect published 2026 amounts and are subject to change.
The commentary on this website reflects the personal opinions, viewpoints, and analyses of the Trinity Wealth Management, LLC employees providing such comments. It should not be regarded as a description of advisory services provided by Trinity Wealth Management, LLC or of the performance returns of any Trinity Wealth Management, LLC client. Views expressed are subject to change at any time without notice.
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