A lot of grandparents in their 60s are watching two things happen at the same time. Tuition keeps climbing. And their own children – the parents of the grandkids in question – are stretched thinner than anyone expected them to be at this stage of life.
The desire to help shows up early, often before there’s a clear plan for what helping should look like. A check at Christmas. A contribution to a 529 the parents opened. A vague intention to “do something” when the time comes.
The harder question – and the one this article is for – is how to help meaningfully without putting your own retirement at risk. The answer isn’t a single number. It’s a series of small decisions, taken in the right order.
Start with your own plan, not theirs
It’s easy to think of the question backward. The grandchild’s college costs are the visible number – $30,000 a year, or $60,000, or more – and it’s tempting to start there and work backward to what you can afford.
That gets it wrong.
The right size of an education gift is whatever your own retirement plan can absorb without strain. Not a stretch. Not a leap of faith that markets will cooperate. What you can give – sustainably – is a function of what your retirement plan can support. That’s not a number you can estimate from feel; it requires actually answering the question of how much your plan can sustain.
If you give beyond that number, the cost doesn’t disappear. It shifts. A grandparent who overcommits today often becomes a parent who needs help in their 80s – which means the same children you were trying to support end up carrying you instead of their own kids’ college. Generosity, in other words, doesn’t always land where it was aimed.
Get the spending number first. Then decide what to give.
A quick reset on financial aid
A lot of older advice about grandparent gifts is still warning about a problem that has largely been solved.
For years, the standard caution was that distributions from a grandparent-owned 529 plan would count as student income on the FAFSA, with a heavy impact on financial aid. That rule changed with the FAFSA Simplification Act. Beginning with the 2024–25 FAFSA, distributions from grandparent-owned 529s no longer count as student income. Though it is important to note that financial aid treatment can vary by program or school.
In practice, this removes the single strongest argument against grandparent-funded 529s. If you held off because of that old concern, the math has moved.
Four ways to help
Most grandparents who want to help with education end up using one – or a combination – of four basic approaches. Each can work in the right situation.
Direct tuition payments to the school. If the grandchild is already enrolled, paying tuition directly to the school is one of the cleanest tools available. Tuition payments (but not other expenses, such as room and board) made directly to an educational institution are exempt from gift tax, with no annual limit. You don’t need to track them against the annual exclusion. You don’t need to file a gift tax return. The tuition payment just has to go to the school, not to the student or the parents.
529 plans. A 529 plan is a tax-advantaged account designed for education savings. Growth is tax-deferred, withdrawals for qualified education expenses are tax-free, and many states offer an additional tax deduction or credit on contributions.
Two structural choices matter. A grandparent-owned 529 keeps control in the grandparent’s hands and, under the simplified FAFSA, no longer affects the grandchild’s financial aid. A parent-owned 529 funded by grandparent contributions gives the parents day-to-day control over the account. Either can work; the right choice depends on how much control the grandparent wants to retain and the family dynamics involved.
529s are at their strongest when the grandchild is young and there’s enough runway for tax-deferred growth to compound meaningfully.
There’s also a relatively new wrinkle worth knowing about. Under the SECURE 2.0 Act, unused 529 funds can be rolled into a Roth IRA in the beneficiary’s name – effectively turning leftover education savings into a head start on the grandchild’s retirement. The rules are detailed: the 529 must have been open for at least 15 years, contributions made in the last five years aren’t eligible, the rollover is capped at the annual Roth IRA contribution limit each year, and the lifetime total can’t exceed $35,000 per beneficiary. The grandchild also needs earned income at least equal to the rollover amount in the year the conversion happens. None of this is automatic, and the specifics warrant a tax professional’s review before any transfer. But the practical effect is that the “what if we overfund it?” worry that used to hold grandparents back from a 529 has lost most of its force.
Annual exclusion gifts. The annual gift tax exclusion lets you give up to a set amount per recipient, per year, with no tax filing required. Both grandparents can give that amount to the same grandchild, doubling the figure. With multiple grandchildren, the numbers add up quickly.
A 529 has a useful wrinkle here as well: “superfunding” allows you to front-load five years of annual exclusion gifts into a single contribution, which can be a meaningful jump-start when a grandchild is young.
Annual exclusion gifts work well when you want to help broadly – across multiple grandchildren, across multiple needs – without dedicating money to education specifically.
Leaving education funds through your estate. For grandchildren who are very young, or not yet born, education support can also be built into your estate plan. Trusts can hold and direct funds for education specifically. Bequests can direct money to grandchildren or to 529 accounts at the time of inheritance.
This is the right tool when the question isn’t how do I help now but how do I make sure the help is there when it’s needed – particularly if you want to provide for grandchildren you may never meet.
The conversation that has to happen
The mechanics are the easy part. The harder part is the family conversation, and it’s where most well-intended education plans run into trouble.
Three questions are worth asking out loud before money moves.
Do the parents know? Education funding from grandparents touches parental decisions in ways that often go unspoken. School choice. Whether the student takes loans. How much personal commitment the student has to the choice. A 529 that the parents don’t know exists is a 529 that may not be used the way anyone intended.
Are you giving equally across grandchildren? And if you are – how will you handle the moment when one grandchild attends a state school and another attends an Ivy? Equal dollars and equal experiences are not the same thing, and that gap shows up later, not at the moment of the gift.
If you’re helping one branch of the family, what does that mean for the others? Generosity that is uneven across your own children can read as favoritism, even when the underlying need is different. A reason that’s clear in your own mind may not be clear to anyone else.
None of these questions has a single right answer. But they aren’t separate questions from the rest of family financial planning, either. They’re part of the same larger work: figuring out how to support adult children sustainably. The families who handle education funding well tend to be the ones where these questions are on the table early, with both spouses and with the adult children themselves.
A simple way to decide
The four vehicles aren’t either/or. Most families end up using two or three in combination – a 529 for younger grandchildren, direct tuition payments for those already in school, annual exclusion gifts as a flexible top-up, and estate provisions for what comes later.
The timing question – help now versus help later – sits underneath all of these. There’s no universal answer to whether to give now or later; there’s an aligned answer for your family, based on what you most want the help to do.
Education funding, done well, isn’t about replacing what parents owe. It’s about removing a constraint from a young person’s life so they can make choices they otherwise couldn’t have made – about what to study, where to live, how much risk to take after graduation, whether to start with debt or without it. That’s a gift worth thinking carefully about, not just writing checks toward.
The starting point isn’t the grandchild’s tuition bill. It’s your own plan. From there, the right vehicles – and the right conversations – tend to fall into place.
For a more detailed walkthrough of how to help grandchildren with education costs while keeping your own plan secure, download Investing in Their Future.
For educational purposes only and should not be construed as individualized tax or investment advice. Please consult your tax professionals regarding your specific circumstances.