Grandparents Now Have a Powerful New Way to Invest in Their Grandkids’ Education
When a grandchild heads off to college, many grandparents are eager to find ways to help. Sometimes it’s sending a little spending money — or maybe a care package full of treats. And now, thanks to a recent rule change in the FAFSA Simplification Act, there’s another powerful way to give support that goes beyond ramen noodles and cookies.
What’s a 529 Plan?
A 529 plan is a special savings account designed for education expenses, offering tax advantages that help the money grow faster. These accounts were first created in 1996 — meaning some parents may be discovering them for the first time, while many grandparents may not have had the option when raising their own kids. The good news is that anyone can open or contribute to a 529 — not just parents.
What Changed?
Until recently, there was a catch: If a grandparent paid college costs directly from their 529, it could hurt a student’s eligibility for financial aid.
That meant a grandparent’s generous gift could unintentionally reduce the amount of need-based help their grandchild received. As of the 2024–2025 school year, that penalty is gone. Withdrawals from grandparent-owned 529s no longer show up on the FAFSA (the government’s Free Application for Federal Student Aid).
Why This Matters
This change makes it easier for grandparents to step in and help without worry. Grandparent contributions can now stretch further, helping cover tuition, books or housing while still allowing grandchildren to qualify for the financial aid they deserve.
Ways to Help
There are a few different ways for grandparents to get started:
- Open a 529 and make regular contributions.
- Add funds to an account the parents have already set up.
- Talk with family about timing and strategy, so everyone’s efforts work together.
Think of it as more than a financial gift — it’s an investment in a grandchild’s future. Unlike a one-time present, a 529 grows over time and can help open doors to education and a broader range of life opportunities.
Keep the Cookies Coming
Of course, that doesn’t mean the care packages should stop — nothing says love quite like homemade snickerdoodle cookies arriving right before finals week. But now, alongside the little things that brighten their days, grandparents have a chance to give their grandchild a lasting advantage. With the new 529 rules, their support can carry grandkids further through college and beyond.
If you have questions about setting up or funding a 529 plan for a grandchild, talk to a Financial Professional.
Sources
https://www.irs.gov/newsroom/529-plans-questions-and-answers