Why 2026 Is the Year to Rethink Your College Savings Strategy

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It’s high school graduation season — and while plenty of grads still go straight to college, a rapidly changing AI landscape has made that route feel less certain.

In 2024, less than half (45%) of teens pictured a two-year or four-year college as their next step, down from 73% in 2018, according to a study from Britebound, a national educational nonprofit. And teens considering vocational schools, apprenticeships and technical bootcamp programs rose to 38% in 2024, up from 12% in 2018, the study found.

The answers are yes and yes — sort of.

Even as the traditional college path looks less like a slam dunk, saving for education is still a good idea. More than 6 in 10 high school graduates immediately enrolled in college in 2024, according to data from the Bureau of Labor Statistics. And although that’s down from 70% in 2009, it’s still a healthy majority.

“AI changing the job market doesn’t mean a degree is worthless — it means the cost of not having options is higher than ever,” says Jeff Judge, a certified financial planner (CFP) with Chesapeake Financial Planners in Forest Hill, Maryland.

“I work with families across the country who are caught between funding college and hedging against a future they can’t quite picture, and my advice hasn’t changed much,” Judge says. “Save, but don’t over-concentrate.”

Planners still agree that 529 plans are one of the most beneficial options for college savings. Any earnings in the account are tax free as long as the money is spent on qualified education costs, and if one of your children forgoes college, you can change the beneficiary to another child (including a relative, like a niece or nephew) or even yourself.

“For most people, I’m suggesting they fund a 529 to cover 50% to 70% of projected costs at an in-state school,” Judge says. “That’s the baseline.”

“If your kid ends up in a trade, a bootcamp, or just figures out something else, the money isn’t stranded,” Judge says.

Planners also like clients to save outside of 529s for a bit of bet-hedging.

“I don’t know about you, but when I was 18, that money would’ve been gone so fast,” says Trevor Ausen, a CFP and founder of Authentic Life Financial Planning in Minneapolis.

Ausen recommends clients keep one foot in both types of accounts: “We don’t want to tie up a ton of money into the 529 if we don’t have to,” he says. “Generally, up to 50% is kind of my goal.”

One fly in the ointment of college savings is that the government recently reduced some federal student loan caps and eliminated graduate PLUS loans altogether.

LImits depend on a student’s year in school, their dependency status and their degree type, among other things. With the cost of college tuition rising faster than any other household expense over the past 40-plus years, according to data from J.P. Morgan, students may hit those thresholds well before they’re done with school.

“It is a big problem coming down the pike,” says Catherine Valega, a CFP and founder of Green Bee Advisory in Burlington, Massachusetts.

One example: Starting in July 2026, students going to medical school will be limited to $200,000 in total federal loans, not including undergraduate loans. Meanwhile, med students who graduated in 2025 paid $228,959 to attend the average U.S. medical school, including health insurance but not including room and board, according to the Education Data Initiative, a nonprofit research group.

Previously, grad students could use grad PLUS loans to fill borrowing gaps, up to the cost of attendance. Starting in July of this year, Grad PLUS loans are no longer available.

“These kids are going to get stuck doing private loans,” Valega says. “I feel like the future doctors are going to be like, ‘I can’t do this.’”

Even if plans change, having enough saved can help your student avoid more expensive borrowing.

Are you panicking? Take a deep breath. The education landscape is constantly shifting, and the best thing you can do is start putting money away in some capacity. The earlier you jump in, the better, because time and compounding can magnify what you save.

“I always tell people, save what you can,” Judge says. “If somebody can only afford to save 20% [of college costs], it’s better than nothing.”

That said, structure your savings with flexibility in mind. Saving to a 529 plan along with a taxable brokerage account gives you more room to pivot if your student charts a less traditional path.

“Save as if a four-year degree is likely, structure the account so you’re not penalized if it isn’t, and revisit the plan when your kid is a sophomore in high school,” Judge says. Then, he says, “you have a better read on where they’re headed.”

About the author

Kate Ashford is a writer and spokesperson for NerdWallet. She is a wealth management specialist (WMS)™ and certified senior advisor (CSA)® and has more than 20 years of experience writing about personal finance. Previously, she was a freelance writer for both consumer and business publications, and her work has been published by the BBC, Forbes, Money, AARP, LearnVest and Parents, among others. She has a degree from the University of Virginia and a master’s degree in journalism from Northwestern’s Medill School of Journalism. Kate has been quoted by outlets including the Associated Press, MarketWatch, NBC and Fortune. She is based in New York.