6 ways grandparents can help pay for college
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Key takeaways:
Paying for college can be a team effort, and grandparents often want to pitch in. If you’ve never done this before, the number of options and rules can feel overwhelming. Here’s a clear, basic overview to help you understand your choices as a grandparent and avoid costly mistakes.
Understand the timing of contributions
Financial aid formulas can reduce a student’s aid if they receive money directly. If you give cash to your grandchild, it could count as “untaxed income” on their FAFSA, lowering the amount of aid they get. A common strategy is to wait until after January 1 of their sophomore year to use money from a grandparent-owned 529 plan. This way, the gift won’t be factored into aid decisions for their junior or senior years.
Example: If your grandchild starts college in fall 2025, you could wait until early 2027 to start using your 529 plan for them, ensuring their final years of aid aren’t affected.
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Consider direct tuition payments
The IRS allows you to pay a college directly for tuition without it counting toward your annual gift tax limit (currently $19,000 per person in 2025). This is different from giving the money to your grandchild first — it must go straight to the school. Direct payments can be especially useful if you want to make a large contribution without triggering gift taxes or dipping into your lifetime estate tax exemption.
Note: This strategy only applies to tuition, not books, housing, or other expenses.
Use 529 plans strategically
A 529 plan is a special savings account for education expenses. The money grows tax-free, and withdrawals for qualified expenses (like tuition, books, and certain room and board) aren’t taxed. As a grandparent, you can:
Open your own 529 plan and name your grandchild as the beneficiary
Contribute to a parent-owned plan so the funds are already in the parents’ control
Select a plan in a state that offers tax deductions or credits for contributions
Important: Coordinate with the parents to decide who will own the account and when funds will be used so you can avoid accidentally reducing financial aid.
Look beyond tuition
Not all college costs are tuition-related. You could help with:
Monthly rent or dorm costs
Textbooks and supplies
A reliable laptop or software
Meal plans or groceries
Transportation to and from school
These expenses can be covered without affecting financial aid as much as direct cash gifts, especially if you pay vendors or service providers directly.
Explore non-cash support
Your time, experience, and resources can be just as valuable as money. You might:
Offer your home during breaks or internships to save them housing costs
Use your network to help them secure internships or job interviews
Pay for test preparation courses or graduate school application fees
These contributions often have no tax or aid impact and can make a big difference in their future.
Coordinate with the whole family
Good intentions can backfire if everyone isn’t on the same page. Have a family meeting to discuss:
Who will own any 529 plans
When funds will be used
How to balance financial aid with contributions
Any legal or tax considerations
Clear communication ensures your help is both impactful and well-timed.
Smart planning today can mean less debt tomorrow
With a little foresight, grandparents can make college more affordable without harming financial aid. The earlier you start planning, the more options you’ll have to support your grandchild’s education in a meaningful way.
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This blog post is provided "as is" and should not be relied upon as a substitute for professional advice. Some content in this post may have been created using artificial intelligence; however, every blog post is reviewed by at least two human editors.
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