529 Plan Contribution Tips for Grandparents Saving for College


529 Plan Contribution Tips for Grandparents Saving for College


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Opening and (and then regularly contributing to) a 529 education savings account with The Education Plan® for your grandchildren is the perfect opportunity to leave a financial legacy while also providing tax breaks and estate-planning benefits for you. And new regulations governing the treatment of contributions from grandparent-owned 529 plans can give your grandchildren an even greater advantage.

Benefits of the 529 Plan

Unlike regular savings accounts, with a 529 plan, you do not have to pay federal taxes on your earnings and withdrawals, as long as they are used for qualified higher education expenses. Contributions are also compounded, meaning that your assets’ earnings are re-invested so the amount of money in the plan increases over time. If you are a New Mexico resident, you have an additional advantage: New Mexico is one of only four states that allows you to claim a state tax deduction every year on all contributions to a 529 plan.

Flexibility and Control

Your grandchildren may ask you for toys or technology, but investing in college savings is one of the best gifts you can give. Although starting early is ideal, you may open a 529 plan at any time in your grandchildren’s lives, whether they are toddlers or teenagers. You may create multiple plans – one for each grandchild – and you control how much and when the funds are disbursed. Any amount you contribute helps relieve some of the financial worry associated with college expenses, such as tuition, room and board, computers, and lab fees.

Smart Giving

Opening a 529 education savings account for your grandchildren is a smart estate-planning tool. In addition to its tax benefits, investing in a 529 account can reduce your potential gift and estate taxes. It also helps you establish a legacy of learning for your grandchildren – one they’ll never forget.

You can contribute up to $16,000 per beneficiary ($32,000 for married couples) each year without having to file a gift tax return. You may also “superfund” your 529 plan by contributing a lump sum distributed over a five-year period; for example, a married couple may give $160,000, but it will be distributed as five contributions of $32,000 each year.

New FAFSA Regulations

In 2020, the federal government passed the FAFSA Simplification Act (FAFSA means Free Application for Federal Student Aid). FAFSA determines eligibility for loans, grants, and work-study programs for students. The act made several changes that will become effective in the 2024-2025 academic year. 

A significant one is that cash support and contributions received from a third party, such as grandparent-owned 529 education savings plans, will no longer need to be reported as assets when determining eligibility for financial aid. This is huge: grandparents can help reduce the cost of college without negatively affecting their grandchildren’s qualifications for financial aid. Funds from parental 529 plans will continue to be counted as assets for FAFSA.

As a grandparent, you have great influence on your grandchildren. They look up to you and seek your input and support, from the time they are little through adulthood. Be a role model and make saving for their higher education a priority. By opening and regularly contributing to a 529 education savings account on their behalf, you are making an investment not only in their education but also in their future.

Signing up for an account with The Education Plan is simple and can be done in just 15 minutes.


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For more information about The Education Plan, call 1.877.337.5268 or view the Plan Description and Participation Agreement, which includes investment objectives, risks, charges, expenses, and other important information; read and consider it carefully before investing.

Please Note: Before you invest, consider whether your or the beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in that state’s qualified tuition program. You also should consult a financial, tax, or other advisor to learn more about how state-based benefits (or any limitations) would apply to your specific circumstances. You also may wish to contact directly your home state’s 529 plan(s), or any other 529 plan, to learn more about those plan’s features, benefits and limitations. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision.

The Education Plan is administered by The Education Trust Board of New Mexico. Ascensus College Savings Recordkeeping Services, LLC, the Program Manager, and its affiliates, have overall responsibility for the day-today operations, including investment advisory, recordkeeping and administrative services. The Education Plan’s portfolios invest in: (i) mutual funds; (ii) exchange traded funds; and/or (iii) a funding agreement issued by New York Life. Investments in The Education Plan are not insured by the FDIC. Units of the portfolios are municipal securities and the value of units will vary with market conditions.

Investment returns will vary depending upon the performance of the portfolios you choose. You could lose all or a portion of your money by investing in The Education Plan depending on market conditions. Account owners assume all investment risks as well as responsibility for any federal and state tax consequences.

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The Education Plan® and The Education Plan® Logo are registered trademarks of The Education Trust Board of New Mexico used under license.

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