Grandparents step in to help fund college education
I’ve recently experienced a new milestone as a grandparent. I’ve watched my eldest grandchild graduate high school and register for college. It’s an exciting, exhilarating, and somewhat scary time for her. As a grandfather it is amazing to see this not-so-long-ago little girl taking this big step toward her future.
Through the years I witnessed a trend of which I too am a part: grandparents stepping up to help reduce the burden of college costs for their grandchildren. I believe this intergenerational support not only provides a financial lifeline but also demonstrates the love and commitment grandparents have for their grandchildren’s future success.
The cost of college education has skyrocketed, making it difficult for many families to afford higher education. Student loans often leave graduates burdened with debt for years to come. And believing that the government will (or even should) forgive student debt is not something on which a student should count.
In response to this crisis, grandparents have recognized the importance of education and the impact it can have on their grandchildren’s lives. By contributing to college costs, they help ensure their grandchildren have access to the opportunities and skills necessary to thrive in an increasingly competitive world. With the weight of financial concerns lifted, students can focus on their studies, engage in extracurricular activities, and develop essential life skills that will shape their future.
Beyond the financial aspect, grandparents’ support carries a personal touch that strengthens family bonds. They understand the sacrifices parents make to provide for their children and, as a result, are often eager to lend a helping hand. Whether it’s covering tuition fees, textbooks, or other expenses, grandparents contribute what they can, lessening the financial burden on their grandchildren and parents alike. This act of support demonstrates their commitment to the success and well-being of future generations.
The act of supporting college costs becomes an opportunity to impart life lessons, instill the importance of education, and share their own experiences. Grandparents can offer guidance and mentorship, helping their grandchildren navigate the challenges of college life. This intergenerational exchange strengthens the bond between generations and creates a sense of continuity in the family’s values and traditions.
Consider using a 529 plan
While there are various ways to contribute to a grandchild’s college education, a 529 plan may provide various advantages to the giver.
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education expenses. Unlike some other education savings options, 529 plans do not have income restrictions. This means anyone can contribute to a 529 plan, regardless of their income level.
The sooner you begin contributing to a 529 plan, the more time your investments have to grow and potentially benefit from compounding returns. I opened EdVest 529 plans for my grandchildren when they were infants.
Contributions made to a 529 plan grow tax-free, meaning you don’t pay taxes on the earnings as long as the funds are used for qualified education expenses. Funds in a 529 plan can be used for a variety of qualified education expenses. These expenses typically include tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. In some cases, room and board expenses can also be covered.
As the account owner, you retain control over the 529 plan. You can determine how the funds are used and you can change the beneficiary if needed. If the intended beneficiary does not attend college, you can transfer the funds to another eligible family member.
Remember to consult your financial advisor for guidance on using a 529 plan and to ensure compliance with applicable laws and regulations. Each state offers its own 529 plan, but you are not restricted to your state’s plan. Research various plans to compare fees, investment options, performance, and available tax incentives to find the plan that suits your needs best.