As another school year winds down, many families are focused on graduation parties, summer camps and the logistics of the next academic year.

But summer can also be an ideal time to step back and reassess how you're funding your family's education, before fall tuition bills, enrollment decisions and financial aid deadlines arrive.

For many households, that means taking a fresh look at 529 plans — accounts that have quietly become far more flexible and valuable than many parents realize.

For years, 529 plans were viewed primarily as college savings vehicles. Parents or grandparents contributed over time, invested the funds and planned for the balance to cover future tuition expenses.

That function is still at the core of many 529 strategies, but recent legislative changes have significantly expanded how these accounts can be used.

The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, expanded how families can use 529 assets. Beginning in 2026, another important change took effect: The annual federal limit for qualified K-12 expenses increased from $10,000 to $20,000 per beneficiary.

That is a meaningful shift for families with children in private school, students who need tutoring or academic support or households thinking more broadly about how education planning fits into their long-term financial plan.

529 plans are no longer just about college tuition

One of the biggest misconceptions surrounding 529 plans is that they can only be used for college tuition.

Under the expanded rules, 529 funds can now be used for a broader range of K-12 education expenses, including tuition, curriculum materials, books, instructional supplies, tutoring, standardized testing fees, dual-enrollment costs and certain educational therapies for students with disabilities.

That flexibility can be especially relevant during the summer. This is often when families are reviewing report cards, evaluating tutoring needs and planning enrichment programs.

However, families should understand that not every education-related expense will qualify, and state tax treatment can vary. Before taking distributions, investors should review their state's rules and may benefit from consulting a tax adviser. But the broader message is clear: 529 plans have evolved into more versatile education funding tools.

Why families should rethink 'overfunding' concerns

Historically, many families were cautious about contributing too aggressively to 529 plans because they feared ending up with excess balances if a child received scholarships, attended a less expensive school or chose not to attend college altogether.

Those concerns have not disappeared, but they have become less restrictive in recent years.

One reason is the expanded list of qualified education expenses. Another is the ability to roll unused 529 assets into a Roth IRA for the beneficiary if certain requirements are met. Current rules allow up to $35,000 to be rolled into a Roth IRA over time, provided the 529 account has generally been open for at least 15 years and other contribution rules were satisfied.

The planning implications are significant. In some cases, a 529 plan can now support a child not only through school, but potentially into early adulthood and saving for retirement as well.

That shift is changing the tone of conversations many advisers are having with families. In the past, clients often aimed to fund only a portion of expected education costs because they worried about excess balances. Today, for families with the cash flow and balance sheets to support it, we are discussing whether it makes sense to fund more aggressively.

Unused dollars may support another family member, help with qualified education expenses earlier than college or, in some cases, begin building a Roth IRA foundation for the child.

In that sense, the 529 has evolved from a narrowly focused college account into more of a long-term family planning tool.

Start earlier than you think — and review your state plan

If there is one consistent takeaway for young families, it is to start early.

The value of a 529 plan comes largely from tax-advantaged growth over time. The longer the money is invested, the more valuable that potential growth can become. Starting early may also matter for families who eventually want to preserve the option of a Roth IRA rollover, since the account-age requirement is generally 15 years.

Families should also periodically review which state plan they are using. Many investors default to their home state's 529 plan, and that often makes sense if the state offers an income tax deduction or credit.

However, many families do not realize they are not always limited to their own state's plan.

Some states, including Pennsylvania, for example, allow residents to receive a tax deduction even when investing through another state's 529 plan. Other states, including Georgia, require residents to use the in-state plan to receive the tax benefit.

That distinction matters because 529 plans can vary significantly in fees, investment options and usability. Certain plans, such as Utah's my529 program, are viewed favorably by advisers because of their low costs and broad investment selection.

For some families, it may even make sense to split contributions between multiple state plans — using one to maximize state tax benefits while directing additional savings to another plan with stronger investment features.

Do not ignore FAFSA or scholarship applications

Summer is also a good time to revisit financial aid planning. The federal FAFSA deadline for the 2025-2026 academic year is June 30, 2026, and families should pay close attention to school and state deadlines, which may come earlier.

Even families who assume they will not qualify for need-based aid should not automatically skip the FAFSA. Some merit scholarships, institutional aid programs or other opportunities may require it.

Scholarships also create additional 529 planning opportunities. If a student receives a scholarship, families may generally withdraw up to the scholarship amount from a 529 without paying the usual 10% penalty on earnings, although income tax may still apply to the earnings portion.

As summer begins, families may want to take time to review whether their current 529 strategy still reflects how these accounts can now be used. Between expanded K-12 flexibility, Roth IRA rollover opportunities and evolving state-plan considerations, many households may have more planning options than they realize.

Related Content

• Best 529 Plans of 2026
• 14 Education Tax Credits and Deductions to Know
• 529 Plan Contribution Limits for 2026
• 2026 Changes to Student Loans You Need to Know
• I'm a Financial Planner: Trump Accounts Are a No-Brainer if You're Eligible (How to Apply)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

At a time when college costs are spiraling out of control for many families, city, state and federal governments are offering relief. In the latest example, New York City has a proposal that would give kindergarteners $1,000 into a college savings account, with some families qualifying for up to $3,000.

Who qualifies for the maximum benefit? Jack Lobel, press secretary of the New York City Council, told Kiplinger, "Any participant who is already eligible for Human Resources Administration (HRA) benefits receives an additional $2,000 on top of the $1,000." The HRA is NYC's social service agency serving families by providing food, housing, child support and other services.

The measure would have to be approved by Mayor Zohran Mamdani, who excluded the proposal from his executive budget in May, per the New York Times, although budget negotiations are ongoing. He has expressed interest in expanding contributions into children's savings accounts.

The NYC proposal is one of the latest government initiatives designed to jumpstart college savings. These programs, which offer free funding, represent the most pertinent news for families seeking college relief. Here's a look at other government-backed funds you may qualify for.

Which states offer college aid for families?

Here's a look at states providing some incentives to help you save for college:

• California: Through the CalKIDS program, children can earn scholarships of up to $1,500 if enrolled in low-income public schools.
• Connecticut: The Baby Bond program helps parents by providing up to $3,200 for low-income families with children to attend college, buy a home or start a business.
• Pennsylvania: Thanks to the Keystone Scholars initiative, every child born in the state receives $100 into a PA 529 education savings account.

Along with these, other states offering incentives include Texas, Indiana, Maine, Nebraska, Rhode Island and Nevada. If you live in one of these states, check out their programs and what you would need to do to qualify.

Meanwhile, there's a new national program about to roll out that benefits all qualified families.

Trump Accounts are bringing the concept nationwide

As part of the One Big Beautiful Bill Act of 2025, the federal government will open tax-advantaged college savings accounts for U.S. citizens born between January 1, 2025, and December 31, 2028. These accounts feature a $1,000 contribution to help jumpstart your college savings.

From here, families can make annual contributions of up to $5,000 into U.S. equity funds — think the S&P 500. Employers can also make contributions, but they're capped at $2,500 annually.

You can open one by filling out Form 4547. Next, download the Trump Accounts app on the Apple App Store or Google Play. This allows you to monitor the account and make additional deposits. Once registered, you'll wait for an invite. These will come out in a few weeks as the Trump Accounts officially launch on July 4.

With this in mind, there are a few limitations to using these accounts. One, you won't be able to make any more contributions after your child reaches 18. Withdrawals are also not tax-free like they would be with 529 plans, and you have a narrower window of investment options. Still, even with the limitations, having $1,000 is a great start for families that need a boost with college savings.

In addition to using these programs, there are other options you can fund yourself that help you reach your savings goals, so you minimize how much debt you or your child needs to take on.

How do child savings accounts work, and what are my options?

While those are programs and proposals where the government funds savings, there are many options for savings or investment vehicles funded by yourself, designed to help parents (or grandparents) save for higher educational expenses. Some programs also allow children to use the money to open a business or to make a down payment on a home.

Plans, such as 529 and Roth IRA, also offer tax savings advantages as long as you use the earnings for college expenses. Here's a breakdown of some of the most popular options:

529 plans

This is a tax-advantaged investment account, where you invest after-tax earnings in ETFs, mutual funds or age-based portfolios. The benefit of this approach is that earnings grow tax-deferred, and as long as you withdraw funds for educational expenses, you won't pay federal tax on them.

This is the best option as you receive federal tax breaks (many states offer them too), and your child can use this money for trade schools, graduate programs and some college expenses overseas. Single filers can contribute up to $19,000, while married filing jointly couples can contribute up to $38,000 annually. You can do more in either instance, but it will go against your lifetime gift and estate tax exclusion.

Read more: 529 Plans: Everything You Need to Know

Roth IRA

While this is primarily a vehicle for retirement savings, you can also use it wisely to fund your child's education. Withdraw your contributions tax-free and your earnings tax-free, provided they're used for higher education expenses. The only thing to consider is that annual contributions are capped at $7,500. Meanwhile, with 529 plans, you don't have annual limits.

Read more: Why Every Grandparent Should Consider a Custodial Roth IRA Now + Where to Save Your Kids' Cash

Coverdell Education Savings Account

These accounts work similarly to Roth IRAs in that you contribute post-tax money into self-directed investments like bonds, stocks and more. Unlike Roth IRAs, Coverdell caps maximum annual deposits at $2,000.

There are also income restrictions with these accounts. Single filers have to earn less than $95,000 to $110,000 or more, whereas if you're married filing jointly, you won't qualify if you earn between $190,000 to $220,000 or more.

There's also a new college savings program that all qualified parents should use.

Read more: Coverdell ESAs vs 529 Plans: Which Should You Choose?

What's the best way to save for my child's college education?

I recommended a blended approach. Definitely open a Trump Account if you qualify because it's a free $1,000. Even if that doesn't become your main account for saving for college, over time, that money can grow, giving your child more funds to use when the time arrives.

I also suggest a 529 plan. They're among the best savings vehicles for college due to their flexible investment choices and tax savings. To determine long-term goals and monthly savings targets, consult with your spouse, a trusted friend or a financial advisor, who can guide you on specific savings measurables. And don't forget to take advantage of any local programs, as they can make saving for college more within reach.

Related content

• Best 529 Plans of 2026
• GOP Trump Account for Savings: Treasury Outlines July 4 Launch
• The Right Way and the Wrong Way to Use a 529 Plan That Doesn't Cover the Full Cost of College
• Student Loans are Changing This Summer for Undergrad and Grad Students and Parents. Here's What to Know.

As the Class of 2026 are handed their diplomas this spring, the outlook is bleak. They're facing not only one of the worst job markets in years, but also — and perhaps more devastatingly — the realization that the promise of higher education they've been sold their entire lives was a lie.

It's a broken promise for graduates, but also for the rest of us. The college-first mindset is ruining the job prospects of our young people and wrecking the economy.

It's time for America to grapple with what its college-first mindset has wrought. And it isn't pretty.

What went wrong?

For years, America sold young people a simple promise: Work hard, go to college, get a degree, and opportunity will follow.

That promise was rooted in something real. College opened doors for millions of people, building careers, widening horizons and helping families gain social mobility. But over time, what was a good path for some became something more rigid.

The four-year degree stopped being one strong option among several and became, for many parents, educators and policymakers, the only fully respectable route to success.

That belief shaped more than culture. It shaped how we spend money, how schools advise students and how the country defines ambition. Now the labor market is exposing how narrow that view has become.

Many young college graduates are finding that the old path into white-collar life no longer works the way it once did.

Just 30% of last year's college graduates were able to find positions in their chosen field, as entry-level jobs continue to be wiped out, and a tenuous economy pushes employers to do more with fewer people.

Growing shortage of skilled workers

College still has value, of course. For many professions, it remains an essential stepping stone. But the larger assumption that a bachelor's degree is the safest default path for nearly everyone now looks less like wisdom and more like habit.

While college graduates are struggling, the U.S. is in desperate need of the skilled, well-paid workers who have been seriously undervalued in our public imagination.

Contractors need electricians, plumbers, welders and HVAC technicians; manufacturers need machinists, maintenance specialists and advanced technicians; healthcare systems, logistics networks, public infrastructure and public safety all depend on people with real skills that do not fit neatly inside the old, four-year college ladder.

These jobs are not fallback options; they are central to the functioning of modern life — and the AI revolution is only making these jobs all the more valuable. The explosive growth of data centers, which require their own fleet of skilled laborers, from construction to plumbing, has increased the demand for certain positions by over 100%.

And they're well-paying jobs, making anywhere from $80,000 to $250,000.

According to a study by the Bipartisan Policy Center, the U.S. is projected to face a shortage of 6 million workers by 2032, even as 70% of jobs will require education or training beyond high school. In construction alone, there are nearly two job openings for every unemployed worker.

Compare that with the unemployment rate for recent college graduates, which is a point and a half higher than the national average.

Yet, across the American education system, college is still spoken about as if it were the only honorable route into adulthood. High schools speak fluently about college preparedness while treating readiness for anything else as a lesser goal. Parents and public policy reflect the same bias.

The path towards traditional degrees is heavily subsidized, while many shorter, job-connected routes remain thin, scattered or culturally discounted. Meanwhile, the success of the four-year path is far from guaranteed; nationally, only about 60% of students complete a bachelor's degree within six years.

Students are being disenfranchised, while the talent shortage for employers only continues to grow.

How to break out of the college-first mindset

Across every level of education and policy, the U.S. needs to extricate itself from this college-first mindset. A healthy society does not organize opportunity around a single script. It builds multiple credible paths to economic security, adult dignity and useful contribution.

A quality education at a top-level university is right for some, yes, but for many others, the path to success looks like an excellent apprenticeship program, a modern community college pathway, employer-led training, or short-term credentials that are tied to real labor market demand.

These aren't side doors for those who couldn't rough it; they're part of a national talent strategy that more closely links the education system with private industry. On a state level, it means partnering with business groups to shape curriculum and state licensing requirements.

On a federal level, it means rethinking how — and what programs — we subsidize.

The Education Department's proposed Workforce Pell rule changes are a start. Updated rules would allow students to use Pell Grants for eligible short-term workforce programs beginning in July 2026, including programs as short as eight weeks.

It's a critical first step, but one that must continue to grow: one new funding stream will not fix a system that remains fragmented, uneven and culturally biased toward one route over the rest.

America does not need to turn against college. It needs to stop acting as if college is the only serious path for serious people. That idea has distorted our education system for years. Now it is starting to fail the people it was supposed to serve.

Related Content

• This Is How You Can Land a Job You'll Love
• I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College Grad
• 25 Best College Majors for a Lucrative Career
• College Grads: This Is What Hiring Managers Are Thinking (But Won't Admit)
• I'm a Financial Literacy Expert: Bubble-Wrapping Our Kids Robbed Them of Resilience. Now What?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For many well‑intentioned parents, saving for college through a 529 plan feels like doing everything right. Contributions grow tax‑free, withdrawals can be tax‑free when used properly, and the account is designed specifically for education.

Yet when college finally arrives, some families discover that the balance falls short of the full cost. Rising tuition, housing expenses and education inflation have turned college planning into a moving target, even for disciplined savers.

The good news is that a 529 plan can still play a meaningful role, even when it does not fully fund four years of school. The key is how the money is used, when it is distributed and how it coordinates with other resources.

Thoughtful strategies can help parents maximize tax benefits, avoid costly mistakes and stretch limited savings further.

Qualified expenses

The primary advantage of a 529 plan is tax‑free withdrawals, but only when distributions are used for qualified education expenses.

At the college level, these expenses include tuition, mandatory fees, books, required supplies, computers, internet access and room and board for students enrolled at least half‑time.

Room and board is subject to limits based on the school's published cost of attendance, especially for students living off campus.

When funds are limited, it is often best to reserve 529 dollars for clearly qualified expenses such as tuition and required fees. These expenses are straightforward to document and provide the strongest tax benefit.

Using 529 money for non‑qualified costs can trigger income tax and penalties on the earnings portion of the withdrawal, reducing the effectiveness of the account.

Timing

One of the most common 529 mistakes involves the timing of the distributions. Distributions must occur in the same tax year that qualified expenses are paid. Paying tuition in January while taking a distribution in December, or the reverse, can unintentionally result in a taxable withdrawal.

Academic calendars can complicate this further. Spring semester tuition bills are often issued in December for a semester that begins in January. Families should coordinate payments and withdrawals so that both occur within the same calendar year. This helps ensure consistency between Form 1098‑T from the school and Form 1099‑Q from the 529 plan administrator.

Careful recordkeeping is essential. Retaining tuition statements, housing invoices and receipts provides clarity at tax time and helps support the tax‑free nature of the withdrawal if questions ever arise.

Other timing considerations

When a 529 balance will not cover all costs, it is rarely optimal to spend it all in the freshman year. College expenses often increase over time, and families may benefit from spreading withdrawals over all four years.

Some parents intentionally preserve 529 funds for later years, when scholarships may decrease or housing costs rise. Others use the account primarily for room and board once grants and discounts reduce tuition expenses.

There is no single correct approach, but the guiding principle is to avoid exhausting the account too early unless there is a clear tax or cash‑flow reason to do so.

Let the 529 complement other funding sources

When college costs exceed 529 savings, the account should be viewed as one part of a broader funding strategy. Most families rely on a combination of current income, savings, financial aid, scholarships and loans.

In many cases, limited student borrowing, particularly through federal student loans, can be a reasonable choice when it allows the 529 to be used efficiently and helps parents preserve retirement assets. Paying some expenses from cash flow can also allow remaining 529 funds to continue growing tax‑free for future years.

Parents should be cautious about draining their retirement accounts or sacrificing long‑term financial security in order to fully fund college. Education is important, but it should not come at the expense of financial stability later in life.

Be mindful of financial aid considerations

Parent‑owned 529 plans are treated relatively favorably in the financial aid process and are generally assessed as parental assets. However, distributions can affect aid eligibility depending on account ownership and timing.

While recent Free Application for Federal Student Aid (FAFSA) changes have reduced penalties related to certain distributions, families should still coordinate withdrawals thoughtfully, especially when 529 accounts are owned by grandparents or other relatives.

Understanding how distributions may interact with financial aid calculations helps avoid unintended reductions in eligibility.

Take advantage of expanded flexibility

529 plans are more flexible than many families realize. In addition to traditional college expenses, funds can be used for certain vocational programs, apprenticeships, certification costs and limited student loan repayment.

If a balance remains after undergraduate education, the account does not need to be hurriedly spent. Funds can be used for graduate school, reassigned to another family member or potentially rolled to a Roth IRA for the beneficiary under current rules and limitations. This flexibility reduces pressure to over‑distribute funds during the college years.

A failure? No way!

An underfunded 529 plan is not a failure. When used thoughtfully, it can still significantly reduce the cost of higher education. The value comes from strategic timing, careful coordination with tax credits and intentional use of qualified expenses.

Families who approach 529 distributions with a plan, rather than reacting to tuition bills, often find that their savings go further than expected. Viewing the 529 as part of a broader financial strategy allows parents to support education goals while still protecting their long‑term financial health.

Related Content

• 14 Education Tax Credits and Deductions to Know
• You Should Be Investing in a 529 Now for Your Kids' or Grandkids' Tuition
• How Grandparents Can Help with Education Expenses
• An Expert Guide to Outsmarting Inflation: Don't Let It Restrict Your Retirement
• I'm a Financial Planner: Here Are Five Lesser-Known Ways to Avoid Estate Tax

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Graduation and adulthood are still years down the road for my two young kids, so my focus now is on setting them up for success when they get there. One way my husband and I are doing that is through 529 college-savings plans.

With these investment accounts, you can set aside money that grows tax-deferred and withdraw it tax-free for qualified education-related expenses, including college tuition and fees, room and board, and computers.

A common concern among parents who contribute to 529s is that their kids won't end up going to college, or that the costs will be lower than expected. Luckily, the qualified uses for 529 money have expanded in recent years.

The One Big Beautiful Bill Act, signed into law last summer, introduced additional eligible expenses, including tuition, books and other fees associated with qualifying non-degree credential programs, such as for plumbing, electrical work, HVAC and welding. You can also withdraw up to $20,000 per year for elementary and secondary school tuition, course materials, tutoring, fees for standardized tests, and more. (Not all states follow the federal rules, so check your state's policies.)

If you end up with leftover money, a compelling option — one that I'm keeping in my back pocket in case my kids don't need all their 529 funds — is the ability to roll over up to a lifetime limit of $35,000 of the 529 balance, tax- and penalty-free, to the beneficiary's Roth IRA.

The 529 plan must have been held for the beneficiary for at least 15 years before you can make this move, and you can't roll over more than the Roth IRA contribution limit ($7,500 in 2026 for those younger than 50) each year.

Even if you withdraw 529 money for non-qualified expenses, all is not lost. You'll pay income tax and a 10% penalty on the investment-earnings portion of the distribution, but not contributions.

Picking a plan

Almost all states sponsor a 529 plan, and you can invest in any of them. More than 30 states offer a tax credit or deduction for contributions. Usually, you can get that tax break only if you invest in your own state's plan.

But in Arizona, Arkansas, Kansas, Maine, Minnesota, Missouri, Montana, Ohio and Pennsylvania, residents get a tax benefit no matter which plan they choose.

If you're shopping among plans, compare features, including the investment options and costs. Most plans offer age-based portfolios that gradually dial down the risk, shifting to more-conservative investments as your child approaches college.

When it comes to minimizing fees, opening an account directly with the state, rather than through a broker, is your best bet. You can compare plans with Saving for College's tool here. The site also rates plans based on performance, ease of use and more.

Read: The Best 529 Plans of 2026

Watch for promotions that could give your savings a boost. May 29 is National 529 Day, and some plan sponsors offer a cash bonus or match to families who open a 529 during a specified window near that date.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

• How This 529 'Superfund' Strategy Can Transform Your Estate Plan
• Use the 529 Grandparent Loophole to Maximize College Savings
• 3 Key Ways You Can Help a Child or Grandchild Pay for College
• Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)

Graduation season is here! While most students fresh out of high school or college welcome a cash gift, you can go a step further by offering it in a way that helps them form good habits and sets them up for a bright financial future. Consider these options.

Give them a savings boost.

One of the best gifts you can give a young graduate is a jump-start on their savings. You could, for example, seed their emergency fund, giving them money to put in their savings account.

Or you could supplement their retirement savings. If the grad is earning income, they can fund a Roth IRA. Contributions to a Roth are made with after-tax money, but withdrawals of those contributions are tax- and penalty-free anytime.

Once the owner reaches age 59½ and has had the account for at least five years, withdrawals of investment earnings are free of taxes and penalties, too.

Offer to make a matching contribution for every dollar that the grad puts into the Roth, suggests Cary Carbonaro, a certified financial planner and managing wealth adviser at Ashton Thomas Private Wealth in Scottsdale, Ariz.

The total contribution (including your gift) that those younger than 50 can make to a Roth IRA for 2026 is $7,500 or an amount equal to their earnings for the year, whichever is less.

Another option: Purchase a Series I savings bond from the U. S. Treasury website, at TreasuryDirect.gov, as a gift.

An I bond's interest rate consists of a fixed rate that never changes and an inflation-based rate that adjusts every six months. The composite rate for bonds issued from May through October 2026 is 4.26%.

An I bond isn't redeemable until the owner has had it for least a year. But it can be an excellent long-term savings tool, reaching full maturity after 30 years.

Whittle their debt.

Student-loan debt can be a heavy burden. The median debt among individual borrowers was in the range of $20,000 to $25,000 in 2024, according to the Federal Reserve.

You might offer to cover, say, a few months of the grad's loan payment, or a portion of the payment for a longer period.

If the graduate has credit card debt, assisting with those payments could be even more impactful. Average interest rates were recently about 22%, according to the Federal Reserve.

And young adults in their twenties have an average of $3,493 in card debt, according to credit-reporting company Experian.

Pay for a financial-planning session.

A graduate who has little in savings and investments may not come to mind as a prime candidate to sit down with a financial planner. But a visit with a professional can help a young adult set a strong foundation.

They might, for example, benefit from a planner's guidance in crafting a budgeting and saving strategy, paying down debt, and reviewing insurance options.

Carbonaro suggests scheduling a one-time, 90-minute session with a CFP. Hourly rates typically run from $200 to $400, according to financial website NerdWallet.

Advisers in the Garrett Planning Network and XY Planning Network offer their services on a fee-only basis — that is, they are paid only by their clients and do not accept commissions for selling financial products — and they don't require clients to meet certain asset minimums.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• Best 529 Plans of 2026
• 3 Key Ways You Can Help a Child or Grandchild Pay for College
• 2026 Changes to Student Loans You Need to Know

Under what circumstances should university students be allowed to take their final exams before the scheduled date or after? Could a professor who denies a request get into trouble if a student complains?

"Ada" teaches history at a major West Coast university. She phoned our office, worried that two of her students in an online course were going to file a grievance against her.

"Mr. Beaver, I have read you in Kiplinger for years and need your help. My syllabus lists all exam dates and times, along with my policy on rescheduling an exam, which is the same as the university's." She included the policy, which states:

With few exceptions, students are not permitted to take any test early or late. Those exceptions include:

• Emergencies, including verifiably documented medical issues, deaths
• Preapproved university events, including athletics and conferences
• Religious observance. Accommodation will be allowed for alternate exam dates if a scheduled exam conflicts with a student's religious creed. Students should tell me during the first three weeks of class beginning, or as soon as possible after an examination date is announced.

In those events, an alternate exam will be administered, different from the test that all the other students have taken to prevent test questions being leaked to others in the class.

Ada's syllabus, which legally forms a contract with students, states in bold letters: "Students are required to show up or log in for all tests. Failing to do so without my approval will result in a failing grade."

A chance to visit Italy

Ada told me, "Two students rushed into my office, without making an appointment, and didn't ask — rather, they stated that I needed to let them take the final exam early or late, because the family of one had just invited both to accompany them on a trip to Italy.

"I pointed out that the test is online, multiple choice, true/false and, with a cell phone, they could take it, even in Italy. They rejected my explanation, so I encouraged them to sign up for the course next term, as not taking the final would result in a failing grade. They left the office in tears, and I heard them mumbling 'grievance' as they walked down the hall."

Ada added, "As I am a new employee, the last thing I need is a black mark on my record, and I am afraid to tell my department chair, so my thinking is that I will send them a polite letter inviting them to sign up for the class next term if they plan to miss the final. What do you think I should do?"

Do not let yourself get blindsided

In my law practice, I've spoken with new and tenured instructors who've experienced virtually identical situations and worried about bringing a student's entitlement issue to the attention of their department chair for fear of looking like a problem employee.

Yet, Ada's silence could be dangerous, as the students could use the grievance process to extort what they want and embarrass her.

"Talking with your chair now is the correct approach," I told her. Here's why:

• This prevents the chair from being blindsided if the students file a grievance and the chair hears about it from the dean instead of from Ada. By just saying, "I want to be certain that I am handling this properly," she would show herself as a responsible faculty member and that she is being fair to all the other students in the class.
• Sending a letter to the students before alerting the chair means she could inadvertently use language the department might not approve of.
• The chair may agree that she should write to the students, and if so, Ada should ask if there is preferred language she should use. She should also show a draft of the letter to her chair for editing and approval.

Heads, I win; tails, I win

I discussed these issues with grievance personnel at universities around the country, and it became painfully clear that higher education has become a world like Alice in Wonderland's, where up is down, right is wrong, and entitled students have found a "heads, I win; tails, I win" strategy to coerce higher grades or avoid consequences for academic misconduct, such as plagiarism or failing to show up for a final exam.

All of the people I spoke with agreed that Ada must immediately alert her chair. By doing so, she would thwart any scheme the students might try to force her to cave in to their demands.

One longtime staff member at a Florida university's grievance office described these students' justification for rescheduling the exam as "capricious."

His tone conveyed disgust. (He asked not to be identified so he could speak bluntly.)

"We see this all the time, and you really have to wonder what kind of education at home they get, as so many view threatening instructors with grievances (as a means) to make up for their failings. If they do not log in for the exam online when it is given, I would tell Ada to give them a zero!"

Dennis Beaver practices law in Bakersfield, Calif., and welcomes comments and questions from readers, which may be faxed to (661) 323-7993, or e-mailed to Lagombeaver1@gmail.com. And be sure to visit dennisbeaver.com.

Related Content

• This Commonsense Guide Can Actually Make You an Excellent Negotiator: It's All About Practice (and Learning From the Best)
• If You're Considering Law School, This History Lesson Is for You
• These Real-World Examples of Societal Impact Can Inspire College Students for Their Next Chapter
• Looking for a Financial Book That Won't Put Your Young Adult to Sleep? This One Makes 'Cents'
• This Is How You Can Land a Job You'll Love

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: Our grandson just graduated from college with $45,000 in debt. I want to pay off his student loans, but my husband says we can't afford it. We're 73-year-old retirees with $2.1 million and $4,000 a month in Social Security that covers most of our bills. Who's right?

Answer: You'll often hear that college graduates are drowning in debt. That might not be true for everyone, but the average student loan debt, including private loans, could be as high as $42,673 today, reports the Education Data Initiative.

A balance that large could be difficult to shake for recent grads who aren't diving into instantly lucrative careers. If you're a retired couple who's financially comfortable and have a grandson who just walked away with a $45,000 pile of student loan debt after wrapping up his studies, you might be inclined to help.

If you're sitting on a $2.1 million nest and your $4,000 monthly Social Security check mostly covers your bills, it's clear that you have some wiggle room in your budget. But your husband might not be as convinced.

Here's how to figure out how to lend a hand in a manner that doesn't compromise your financial security or convey the wrong message.

Paying off the loan probably won't change your lifestyle

A $2.1 million nest egg is not the same thing as unlimited financial resources. But if you're mostly able to live on Social Security and that $2.1 million is just your "extra" cash, a $45,000 withdrawal might have a minimal impact, says Deon Strickland, Ph.D. financial adviser at Scholar Advising.

"If you’re looking at the couple, 73 years old, about $2 million in retirement assets, and $4,000 a month in Social Security, you’re probably talking about somewhere around $100,000 a year, give or take, available to spend after tax," he says. "They’re in a position where this decision is not going to dramatically change their lifestyle."

That doesn't mean you should just write a check without thinking things through, though.

As Strickland says, "This really comes down more to the relationship with the grandson and what they’re trying to accomplish. If the grandson has been responsible, appreciates the opportunities he’s had, then maybe there’s a way to help. But it doesn't necessarily have to be just writing a check."

Strickland says you shouldn't feel obligated to pay your grandson's debt in its entirety.

"It could be structured," he explains. "It could be something like, 'If you pay the first $5,000, we’ll match it.' Something that reinforces good behavior rather than replaces it."

Consider your goals carefully

A $45,000 gift to repay student loans might be a small chunk of a $2.1 million pool of money. But for your grandson, it's huge.

Strickland says that if you're looking to make that gift, it's important to tell the right story.

"It’s more about what they want to pass on, not just financially, but in terms of values," he says. "While $45,000 is not going to be a huge shock to their overall financial picture, it is an opportunity to demonstrate how to make good financial decisions."

In other words, if you're going to give your grandson the money, set some expectations and help him realize what that gift represents. It could be the thing that allows him to build savings early on or get a head start on accumulating his own retirement nest egg so that he might one day be in a position to help a grandchild pay off their student debt.

Figure out the path that's best for your cash flow

Even though you can probably afford to pay off your grandson's $45,000 debt without blinking, that doesn't mean you shouldn't try to do so strategically. Brandon Agamennone, CRPC and wealth management adviser at Victory Private Wealth, says you have several options for handling that bill.

"It depends on what you need for your income," he says. But one option is to use dividends or interest from your portfolio to pay off the loan over a few years. Another option is for each of you to give your grandson a $19,000 gift this year, for a total of $38,000, to stay within the gift tax limit. You can then tackle the remaining loan balance the year after.

Another option? "If you have RMDs on a portion of your investment portfolio," Agamennone says, "you could take those and then gift some or all of that amount to your grandson to pay off the student loan."

Make sure your grandson knows what repayment options he has

A $45,000 student loan bill might seem overwhelming to a new college graduate. But before you rush to come to the rescue, you could want to walk your grandson through his options for repaying that debt, either on his own or with assistance.

"I would have the grandson understand college loan consolidation options," says Brian Safdari, founder of College Planning Experts. "Maybe the [grandson] can get some student loan interest deductions while working."

Safdari thinks it's important that borrowers realize that there are different ways to tackle college loans. With federal loans, for example, there are income-based repayment plans that can be more affordable.

"Start with a strategy and a plan first," he says. "Then execute the best plan that provides the family the best outcome."

That plan could involve having you foot some or all the bill, but it's important to dole out that money in the context of a broad plan everyone involved is on board with.

Next Steps to Help Your Grandchild Afford College

• The basics
  • Use the 529 Grandparent Loophole to Maximize College Savings
  • We're 75 With $3.2 Million. Our Grandchild Needs Help Paying for College.
  • I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?
• Balance your retirement security with supporting grandchildren
  • We Retired at 70 With $4.3 Million. My Wife Won't Spend 'Our Grandkids' Inheritance,' but I Want to Travel.
  • We're 54 With $1.8 Million. My Wife Wants to Start a College Fund for Our Grandson, but I Think We Should Keep Funding Our Retirement.

Federal student loans are undergoing an overhaul. Starting July 1, new students who take out a loan will have fewer repayment-plan options, and some families who already have loans will be forced to select a different repayment plan.

Parents who take out federal loans to help their children pay for college may be subject to new borrowing limits. And for those starting a new graduate or professional degree, Graduate PLUS loans will no longer be available. The One Big Beautiful Bill Act (OBBBA), signed into law last year, ushered in these changes.

If you or your child is already paying off student loans, or if your family is planning to borrow for college in the future, there's a good chance some of these updates will affect you. Here, we offer details on what you should know, as well as strategies for families to make the best choices.

The new student loan repayment plans

The OBBBA narrows to two the options for students taking out a loan on or after July 1. One is an income-based plan known as RAP (Repayment Assistance Plan). Under this new plan, payments range from 1% to 10% of the borrower's adjusted gross income, with a minimum payment of $10 a month. Lower-income borrowers pay a smaller percentage; the maximum 10% applies to those with an AGI of $100,000 or higher, and there's no dollar limit on the monthly payment. RAP deducts $50 from the monthly payment for each of the borrower's dependents. After 30 years, any remaining balance is forgiven.

The other option for new borrowers is the Tiered Standard Plan, with fixed payments over the course of 10, 15, 20 or 25 years, depending on your federal loan balances. If your loan balances add up to less than $25,000, the repayment term is 10 years. For loans of $100,000 or more, the term is 25 years. Borrowers may prefer this option if they want fixed, predictable payments, if they would like to pay off their loan more quickly than they might with RAP, or if their payment with this plan is lower than it would be with RAP.

The Public Student Loan Forgiveness program remains in place. Those who have direct loans and work for a government or nonprofit employer, such as firefighters, teachers and first responders, can have remaining balances forgiven after 10 years of repayments on either plan. To minimize the amount they pay before forgiveness, those who may qualify should evaluate each year whether RAP or the Tiered Standard Plan results in a lower monthly payment.

Choices for those who borrowed before July 1. The OBBBA brings an end to three income-based repayment options: SAVE (Saving on a Valuable Education), PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment). Borrowers who are in one of these plans will have to choose among the remaining options — and those on the SAVE plan will have to make a decision soon.

The SAVE plan was designed to be more affordable than other income-based plans, in part by preventing unpaid interest from accumulating enough to cause the loan balance to grow. Borrowers enrolled in SAVE will need to change plans in the coming months, with their servicer providing information on the deadline. They can choose among existing plans, but if they go with PAYE or ICR, they'll have to switch again before those plans sunset in 2028. Starting July 1, 2026, SAVE borrowers can also select among the new repayment-plan options.

Before July 1, 2028, borrowers on the PAYE or ICR plan will have to switch to the new RAP or Tiered Standard Plan, or they can choose IBR (Income-Based Repayment), the sole remaining option among existing income-based plans. IBR caps monthly payments at 10% or 15% of your discretionary income, depending on when you first took out the loan. Payments can be as low as $0, with a repayment time frame of 20 to 25 years.

Because IBR limits your payment based on income, it may be the best choice for borrowers with higher income and debt levels. For instance, with $100,000 in loans and a salary of $80,000, the monthly payment on IBR would be $334. For a RAP borrower with no dependents, it would be $534.

Borrowers with lower debt and income may be better off with RAP. For example, someone with $30,000 in debt and $50,000 in income who has two kids would have a $25 payment with RAP, compared with $84 with IBR.

Student loan strategies for parents

Parents who take out a PLUS loan before July 1 can borrow up to the cost of their child's attendance, minus the amount of any grants, scholarships and federal loans made directly to the student. For loans disbursed on or after July 1, parents can borrow up to $20,000 per student annually, with a total limit of $65,000.

If your student was enrolled in school before the 2026–27 school year, you can maintain access to Parent PLUS loans under the previous borrowing standard for three years, as long as your child's school and degree type don't change and they don't take a semester-long break from classes other than for an approved medical reason.

If your child is scheduled to start school this fall, you may be able to access Parent PLUS loans under the pre–July 1 borrowing limit if they enroll in classes for the summer 2026 session. If you go this route, apply as early as possible for summer financial aid on the 2025–26 Free Application for Federal Student Aid, or FAFSA (the federal deadline is June 30, 2026). The courses your student takes must count toward their degree and add up to at least half-time status.

Before you take on debt to fund your child's education, however, make sure you have a solid plan for your own financial security. “I discuss holistically with clients how student loans will affect their retirement, vacations, ability to buy a new home and other personal life goals before they decide how much to borrow,” says Jack Wang, a wealth adviser and host of the Smart College Buyer podcast.

To prevent both students and parents from getting in over their heads, families may need to consider such cost-cutting strategies as focusing on affordable schools or having the student start at a community college and then switch to their preferred school later.

Repaying parent loans. Under the rules in effect before July, parents have a few ways to repay their PLUS loans, including a plan with fixed monthly payments for 10 years. Borrowers who owe more than $30,000 can use a plan that spreads fixed payments over 25 years.

Parents who consolidate PLUS loans from different school years into a single federal loan are also eligible for an income-based plan, which could lower their payments, with any remaining balance forgiven after 25 years. But starting in July, new parent borrowers have access only to the standard repayment plan, with fixed payments that are spread over 10 to 25 years.

If you act quickly, you may still have time to consolidate your PLUS loans and then enroll in ICR before July, at which point the new law cuts off this strategy. Even if your payments are manageable now, you may want to do this if income-based payments could benefit you at some point— say, because you expect to be paying off the loans in retirement, when your income may be lower than it is now. As long as you make one payment in ICR first, you can then change programs to IBR.

Note that if you take out a new Parent PLUS loan on or after July 1, you'll lose access to the income-driven repayment option, even on any loans you consolidated before that deadline. To avoid that scenario — and reduce your borrowing — consider other funding options. Most schools offer low-fee tuition-payment plans that allow you to make payments throughout the year.

Student loan updates for graduate and professional students

Until July 1, students earning a graduate or professional degree can access two types of federal student loans: Unsubsidized loans and Graduate PLUS loans. With unsubsidized loans, you must pay interest while you're in school. These loans charge lower interest rates than Graduate PLUS loans, so borrowers should turn to unsubsidized loans first.

For students who can't cover all their education expenses with unsubsidized loans, Graduate PLUS loans can bridge the gap up to the full cost of attendance. But starting July 1, borrowers can no longer take out Graduate PLUS loans. Students can still take out unsubsidized loans, but with some new caps on how much you can borrow.

Graduate students (including those earning a master's degree as well as those in most PhD programs) will be subject to a lifetime cap of $100,000 for unsubsidized graduate loans; the annual limit is $20,500. For students in eligible professional programs, such as medical, dental, law and pharmacy school, the unsubsidized-loan limit is $50,000 annually. The lifetime limit, not including undergraduate loans, is $200,000.

If you were enrolled in graduate or professional school before July 1 and haven't taken out a federal student loan yet, consider getting one for the spring or summer session if you think you may need one in the next three years. If a direct loan is disbursed before July 1, 2026, you can keep borrowing Graduate PLUS loans for up to three years while completing your program. Taking out even a $100 loan gives you the option to borrow more later, if you need it.

Scheduled to start your graduate or professional program this fall? Call admissions and see whether you can apply for the summer 2026 session, starting your program early and potentially allowing you to get a Graduate PLUS loan before the July 1 deadline. Confirm it will not affect any other financial aid you're scheduled to receive in the fall and spring terms.

You'll need to enroll in enough summer coursework to be designated at least a half-time student (and apply for financial aid that is disbursed before July 1, 2026), to be grandfathered into the PLUS loan program, says Sarah Austin, policy analyst for the National Association of State Financial Aid Administrators.

Options beyond federal loans. With Graduate PLUS loans off the table, some borrowers may consider private loans. Generally, however, private loans don't come with the same protections or income-driven repayment options that federal loans do, so you'll need to weigh the decision carefully. And it's best to limit your overall student debt as much as possible. A financial adviser can go over a post-graduation budget with you, factoring in your expected salary.

If you determine that you can afford to take on some private loan debt, consider national non-profits such as MEFA or EdvestinU, says student loan expert Colleen Krumwiede. These providers can offer options for borrowers who may not qualify for other loans because they have a thin credit history or don't have a cosigner. She also recommends looking for lenders that specialize in certain majors. For instance, a lender that focuses on medical student needs may also lend money for residencies.

Check for state lending programs, too. “A small number of states already run their own student-loan programs, some dating back decades,” says Thomas Harnisch, vice president for government relations at the State Higher Education Executive Officers Association.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• Student Loan Shake-Up: What the OBBB Means for Parent PLUS Borrowers, From a Financial Aid Expert
• The New Rules for Student Loans
• How to Find Free Money for Graduate School as Federal Loans Tighten in 2026

Question: We're 75-year-old retirees with $3.2 million. Our son's pressuring us to help pay for our granddaughter's college so she can avoid loans. It's not our fault she picked a school that's $90k a year! What should we do?

Answer: It's hardly a secret that obtaining a college degree is an expensive prospect.

The average cost of college today is $38,270 per student per year, which includes books, supplies, and living expenses, according to the Education Data Initiative. The average borrower with federal student loans today owes $39,547. Moreover, the full annual cost of attending a top school can, shockingly, top $90,000. It's understandable that your grandchild wants to avoid graduating with burdensome debt.

If you're well-off retirees, you may be asked to help cover your grandkids' education costs so they don't graduate with debt. But if you have a granddaughter who's chosen a school with a $90,000-a-year price tag, that ask may not be reasonable, even if you have a $3.2 million nest egg to fall back on.

Here's how to handle what could be a tricky situation without hurting your loved ones or putting your own retirement at risk.

You need to be comfortable helping out financially

As grandparents, it's natural to want to help your granddaughter out. But even with a generous nest egg, you may not feel ready to start writing large checks just yet.

Mike McCracken, president and founder of Wealth Guide Financial, says, "Having $3.2 million at age 75 is a great position, but that doesn't mean you should automatically write a big check for a $90,000-a-year school tuition."

McCracken says that before you hand out so much as a dollar, ask yourself whether helping out with college will leave you with enough money to live comfortably for the rest of your lives without the risk of running out of money. Keep in mind that you may have extra costs to contend with, from home repairs to medical bills to long-term care. So the numbers need to work for you.

Brett Bernstein, CFP, CEO and Co-Founder of XML Financial Group, agrees.

"The first thing the grandparents need to do is build a financial plan to ensure that they can maintain their current lifestyle and see how much they can financially help their grandchildren," he says. "Once they have an understanding of the actual number they can contribute, then they have to decide how much of that they want to gift."

Make sure you're treating your heirs fairly

It's one thing to help fund your granddaughter's college education if she's your only grandchild. If not, you risk running into problems if you start cutting her large checks without mapping out a plan.

McCracken says the cleanest way to go about things is to document everything meticulously.

"Have your estate-planning attorney draft a simple amendment to your revocable living trust stating that the amount you paid for college will be subtracted from your child’s or grandchild’s eventual inheritance," he suggests, assuming you have that legal document in place. If not, put something in place before distributing a portion of your assets.

Another option, McCracken says, is to treat the money as an interest-only loan that your granddaughter or their parents will repay.

"This keeps everything transparent, protects the other children’s share, and prevents anyone from being taken advantage of," he says.

Be as tax-efficient as possible with your giving

Unfortunately, there's no easy way to enjoy a tax break in the course of gifting a grandchild money for college. Contributions to a 529 plan may grow tax-free, but you don't get to deduct the sum you put in.

Still, it's important to be mindful of tax implications. To that end, McCracken says that if you're going to help, paying tuition directly to the school is usually the most tax-efficient route. This way, it doesn’t count against your annual gift tax exclusion.

McCracken also warns that giving directly to your grandchildren could reduce their financial aid eligibility.

Bernstein agrees that paying tuition directly is generally the best option, and that eking out tax savings is unlikely.

"The only way for a grandparent to get some benefit is if the school is willing to accept a highly appreciated asset in return for the tuition, or if the school is a qualified charity and the grandparent can [send] part or all of the required minimum distribution directly to the school," he explains.

However, Bernstein says, these strategies typically don't work, so "this comes down to what the grandparent can ultimately afford to gift and their willingness to do so."

Read: Use the 529 Grandparent Loophole to Maximize College Savings

Don't succumb to pressure

Aside from genuinely wanting to help your granddaughter, you may be feeling immense pressure to contribute toward her education. That's why McCracken supports having an honest family conversation and setting clear boundaries up front.

"You can say something like, 'We love you and want to help, but we also must protect our own retirement and want to keep our inheritance planning even among the heirs,'" he suggests.

From there, explain how you're willing to structure the assistance if you feel comfortable chipping in.

"Helping the next generation is one of the most rewarding things you can do," says McCracken. "But it should never come at the cost of your own financial peace of mind."

Read More

• Use the 529 Grandparent Loophole to Maximize College Savings
• We're 62 and Plan to Sell Our $1.2 Million House to Retire, but Our Daughter and Grandkids Live With Us. My Wife Says We Should Stay. I'm Ready to Ask Them to Move.
• I Want to Help Pay for My Grandkids' College. Should I Make a Lump-Sum 529 Plan Contribution or Spread Funds out Through the Years?

Question: At 54, we're young grandparents. My wife wants to start a college fund for our grandson, but I think we have to focus on funding our retirement. We've already saved $1.8 million. Who is right?

Answer: As of 2022, the most recent year for which data are available, the average retirement savings balance among 54-year-olds was about $313,000, per the Federal Reserve. If you're 54 years old with $1.8 million saved for retirement, you're clearly in a strong position compared to the typical person your age.

Just because you've amassed a $1.8 million fortune by age 54 doesn't mean your work is done, though. If you're planning to stay in the labor force for another decade or longer, you have a prime opportunity to add to your savings and buy yourself even more long-term financial security.

What if that's your plan, but your wife would rather focus on making contributions to a college fund for your grandson? It's clearly a kind and generous thing to do. But it's important to strike the right balance so that a desire to help your grandson doesn't put your retirement at risk.

Your nest egg needs to take priority

Saving for retirement and funding a college account for a grandchild are both excellent goals. But Eric Croak, CFP and President at Croak Capital, says contributing to a retirement account in the coming years should be your first priority.

"Retirement contributions come first. Period," Croak insists. "Retirement has to come first because there are no scholarships or loans for being old and poor."

John Madison, CPA and personal financial counselor at Dayspring Financial Ministry, agrees.

"As a young grandparent myself, I appreciate the desire to help your precious grandchildren get a head start on college funding," he says. "However, any contributions to a grandchild's 529 account should only be made after carefully considering your own retirement funding needs."

Madison says that in this situation, it pays to aim to contribute 15%-20% of your income toward retirement. But if there's money left over beyond that, then by all means, fund a 529 plan or another college account of your choice.

Croak agrees with this approach and says that even if prioritizing college savings doesn't make sense today, there may be opportunities to do so in the future.

"Life often has a way of providing more financial flexibility down the road, whether it’s an extra bonus year, an inheritance, or a fully paid-off house," he says. "If they maximize their retirement accounts first, they can always 'superfund' a 529 later."

Croak explains that 529 plan contributions can be front-loaded with five years of gift tax exclusions at one time.

"Knowing that possibility exists means there’s no need for over-funding now," he says.

Don't assume a 529 plan cuts off access to funds

If your grandson is fairly young, you may be eager to start saving for his education now, when that money still has years to grow. The danger of prioritizing a 529 plan is losing out on money you may end up needing for retirement if your portfolio doesn't grow as much as you'd like.

But Matt Hylland, financial planner and investment advisor at Arnold and Mote Wealth Management, says you may have more flexibility than expected.

"It is smart to be thinking about how much you can comfortably save today in a 529, because the tax-free compounding growth is so valuable," Hylland says. But, he continues, "Realize that 529 contributions are not irrevocable. If your retirement planning does not go to plan, you will have access to the money in the 529 account."

When a 529 plan is used for non-qualifying withdrawals, earnings are subject to income taxes and penalties, Hylland explains. However, your original contributions are not (though some states may claw back income tax deductions on contributions).

"Putting money in a 529 now will give decades for tax-free growth, potentially," Hylland says. "That value may greatly outweigh the small likelihood of needing an emergency withdrawal and paying taxes."

Choose your college account strategically

If you don't like the idea of tying up college funds in a 529 plan because you might need the money for retirement and don't want to face penalties, Hylland says there are other types of accounts you can consider utilizing instead.

"You could start a new brokerage account that is earmarked for future college goals," he says.

"This is not as tax-efficient as a 529. You will be subject to ongoing taxes on dividends and interest, along with capital gains. However, you will eliminate any income tax and penalties if you ultimately need the money for other uses."

Look at the big picture

While Madison agrees that retirement savings should take priority over helping a grandchild go to college, ultimately, his suggestion is to look at the total financial picture before deciding what to do. In addition to the $1.8 million already saved, Madison suggests factoring in other planned income streams, like Social Security and pensions.

From there, he says, you can run projections based on where you are today and your anticipated retirement spending needs.

"If this in-depth study shows they are on track for meeting their retirement income needs, easing up on additional retirement contributions to instead fund a 529 would be perfectly reasonable," he says.

Your projected retirement age should also factor into the decision. Although some people end up having to retire sooner than planned, a $1.8 million nest egg left untouched for 13 years could grow to $3.8 million at a somewhat conservative 6% annual return.

If all goes according to plan, you may end up with more than enough retirement savings even if you contribute minimally to an IRA or 401(k) in the coming years. So while it's good to keep funding those accounts to build in a buffer for a forced early retirement, a slower-than-average market, or other suboptimal scenarios, after doing a financial deep dive, you may find that you have more leeway to fund that college account than you thought.

Do you have a tricky money situation? We want to hear about it for an upcoming advice column. We're interested in retirement-related financial dilemmas, especially those that impact relationships with partners, friends and family. You will remain anonymous. Submit your question to KipAdvice@futurenet.com. Not all questions will be published.

Read More

• Use the Grandparent Loophole to Maximize College Savings
• 529 Funds and a Roth IRA: How to Use One to Jumpstart the Other
• How to Claim Your Trump Account $1,000 Match
• We Retired at 70 With $4.3 Million. My Wife Won't Spend 'Our Grandkids' Inheritance,' but I Want to Travel.
• I Retired at 63 to Enjoy My Free Time but My Grown Kids Want Help With Child Care. I Love My Grandkids, but It's Too Much. What Should I Do?

For parents of the Class of 2026, current headlines can feel challenging. After years of tuition payments and academic rigor, the prospect of a "weak" entry-level hiring market — the softest since the pandemic — raises a fundamental question: Is the return on investment for a college degree diminishing?

Remember that market cycles apply to labor just as they do to equities. While a growing share of employers may characterize the entry-level landscape as "poor" or "fair," it is vital to separate near-term economic friction from long-term wealth and career planning.

For the Class of 2026, success may not look like the linear path of previous generations, but with a strategic pivot, the ROI remains achievable.

The shift in entry-level dynamics

Several structural forces are currently cooling the "big three" sectors that traditionally absorbed new talent: Technology, consulting and corporate rotational programs.

We are seeing a "flight to experience," where employers are increasingly filling junior roles with professionals who have one or two years of experience — often those recently displaced by corporate restructuring — rather than first-time entrants.

Furthermore, the "AI effect" is no longer theoretical. Research from Forrester suggests that automation could replace roughly 6% of U.S. jobs by 2030.

For a new graduate, this is particularly relevant because the "training ground" tasks — the spreadsheet modeling, basic coding and administrative coordination — are the exact functions being consolidated by generative AI.

Where the growth has migrated

Reports of the "death of the entry-level job" are, in my view, overstated. Demand hasn't disappeared; it has migrated.

According to the Bureau of Labor Statistics, the growth engine has shifted toward sectors that require high-touch human interaction or specialized technical oversight.

Health care continues to lead, with roles like nurse practitioners and specialized clinicians seeing unprecedented demand.

Simultaneously, we are seeing a resurgence in "new collar" roles. Massive investments in data centers and energy infrastructure have created a premium for construction technologists and specialized electricians.

For the student focused on immediate ROI, targeted certifications and apprenticeships are increasingly viewed as primary wealth-building strategies rather than fallback options.

Strategic planning for families

Career outcomes remain highly individual, and as parents, our role is to provide a stable financial and emotional foundation that allows for flexibility.

Here are several planning considerations to help your graduate navigate this transition:

1. Reframe "survival" jobs as skill-building

If the "dream job" doesn't materialize by June, encourage early workforce participation in any capacity. I often tell clients that a job at a high-volume café is a masterclass in behavioral finance.

Managing high-stakes transactions and maintaining service quality under extreme time constraints is excellent preparation for dealing with executives and clients later in life.

In interviews, a graduate shouldn't just say they were a barista — they should describe how they managed logistics and customer expectations in a high-pressure environment.

2. Establish a "bridge fund"

From a cash-flow perspective, families should consider carving out a defined "transition fund." This isn't an indefinite subsidy, but rather a structured bridge to cover living expenses while a graduate searches for the right fit or pursues a specialized certification.

Having three to six months of liquidity prevents a graduate from making a desperate career move that might hinder their long-term trajectory.

3. Lean into geographic arbitrage

The traditional hubs — New York, San Francisco, Chicago — are facing stiff competition and high costs of living.

However, ADP Research indicates that cities such as Baltimore; Milwaukee; Raleigh, North Carolina; and Austin, Texas, are seeing hiring increases.

Moving to a high-growth, lower-cost secondary market can significantly accelerate a young professional's ability to begin saving and investing early.

4. Cultivate "human" capital

While technical skills get the first interview, "soft" skills — or what I prefer to call "durable" skills — secure the career. Encourage your student to focus on the quality of their education to refine their thinking.

In an AI-driven world, the ability to synthesize complex information, practice empathy and maintain open-mindedness is the ultimate hedge against automation.

Every generation enters the workforce facing its own "unprecedented" challenge. The Class of 2026 is entering a market that demands more adaptability and technological fluency than perhaps any before it.

The goal of planning isn't to guarantee a specific starting salary, but to build a framework that allows for pivots.

By focusing on transferable skills, geographic flexibility and a sound financial bridge, parents can help their children turn a challenging market entry into a resilient career foundation.

The degree is the ticket to the stadium — how they play the game in the first few innings will depend on their ability to adapt.

Related Content

• This Is How You Can Land a Job You'll Love
• I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College Grad
• Job Hunting: Five Ways to Help Your Graduate
• Will My Children Inherit Too Much?
• I'm a Wealth Planner: Forget 2026 Market Forecasts and Focus on These 3 Goals for Financial Success

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

For years, paying for graduate school followed a predictable pattern: Borrow what you need and deal with repayment later. Federal Grad PLUS loans made that possible by allowing students to cover nearly the full cost of attendance after other aid was applied.

According to the Education Data Initiative, in 2025 the average outstanding balance on a Federal Grad PLUS loan stood at about $66,000, which underscores how central these loans have been to graduate financing.

That model is changing.

Beginning July 1, 2026, new graduate students will no longer have access to Grad PLUS loans. Federal borrowing will instead be governed by annual and lifetime limits, with caps determined by whether a student is enrolled in a professional degree program or another type of graduate program.

For many students, especially those in high-cost programs, federal loans may no longer cover the full cost of earning an advanced degree.

This shift matters most for programs with high upfront cost structures, including degrees commonly associated with medical school funding, law school funding and other advanced career pathways where students often assume federal loans will fill any remaining gaps.

In 2026 and beyond, that assumption becomes far less reliable.

Graduate school remains attainable, but the financing strategy must evolve. As Grad PLUS ends, scholarships, assistantships and other forms of "free money" should become the foundation of a funding plan, not an afterthought.

A new borrowing framework for graduate students in 2026

Starting with students who borrow for the first time in the 2026–27 academic year, federal graduate loans will follow a two-tier structure:

Non-professional graduate programs (including most master's degrees):

• Annual limit: $20,500 in Direct Unsubsidized Loans
• Lifetime graduate aggregate limit: $100,000

Professional degree programs (such as medicine, law and dentistry):

• Annual limit: $50,000 in Direct Unsubsidized Loans
• Lifetime graduate aggregate limit: $200,000

In addition, an overall lifetime federal loan cap of $257,500 applies across undergraduate and graduate borrowing combined.

Students and families should act early by:

• Confirming how their program is classified with the financial aid office
• Requesting clarity on annual and lifetime borrowing limits specific to that program

Doing this upfront helps avoid unexpected funding shortfalls later in the program.

What counts as a professional graduate degree?

This is where many families get tripped up.

Under federal aid rules, professional graduate programs are narrowly defined. They generally include doctoral-level degrees that lead directly to entry into regulated professions, such as medicine (MD or DO), law (JD), dentistry, pharmacy, veterinary medicine, optometry, podiatry, chiropractic care, theology and clinical psychology.

Importantly, career outcomes do not determine classification. A program's federal status is defined by U.S. Department of Education rules — not by earning potential, licensure requirements or job demand.

As a result, some high-cost, career-focused degrees may not qualify for professional-level loan limits.

Classifications are set through federal student aid regulations and reflected in the Classification of Instructional Programs (CIP) codes used in federal reporting.

Universities may also signal distinctions in their catalogs, often separating professional schools (such as law or medical schools) from graduate schools of arts and sciences.

The key takeaway: Do not assume a program is treated as professional for federal aid purposes.

Students should confirm classification directly with their financial aid office and plan accordingly, especially in high-cost programs where borrowing limits may not align with total expenses.

Why funding gaps will become more common

Graduate borrowing has increased steadily over the past two decades. While graduate students make up a smaller share of borrowers, they hold a disproportionate share of outstanding federal student loan debt.

That imbalance has led policymakers to impose borrowing caps to limit government risk and promote more sustainable lending.

For students, the result is clear: Funding gaps are more likely — particularly in programs with high tuition, unpaid clinicals or internships, or limited ability to work while enrolled.

These gaps extend beyond tuition. Housing, transportation, exam fees, equipment, childcare and licensing costs all add pressure as borrowing options narrow and private loans become the fallback.

Start with the funding gap, not the loan amount

With borrowing now capped, planning should begin by identifying the true funding gap, not by maximizing loan eligibility.

The funding gap is the difference between these two things:

• Total cost of attendance (direct and indirect)
• All non-loan resources available to the students

Many students focus only on tuition. Including living expenses and program-specific costs often reveals a much larger gap, especially in high-cost graduate programs that are not classified as professional.

Students should:

• Calculate their full funding gap early, including living expenses
• Actively pursue scholarships, assistantships, employer benefits and other non-loan resources first
• Turn to federal or private loans only after non-repayable options are exhausted

Where 'free money' fits into the new reality

Free money rarely comes from a single source. It is built over time.

Departmental scholarships and fellowships remain among the most effective and most overlooked options.

Regular conversations with faculty, monitoring departmental announcements and engaging in academic or research groups can uncover funding opportunities that are not widely advertised.

Graduate assistantships are another cornerstone. Teaching and research roles often provide stipends, tuition reductions and health insurance, significantly reducing reliance on borrowing.

A stipend that offsets living costs can lower future debt more effectively than taking out additional loans.

Employer tuition assistance is also increasingly important, particularly for working professionals. Even partial reimbursement can materially improve affordability when applied over multiple terms.

Professional associations and workforce-based programs offer additional funding that many students overlook because it is not labeled as traditional financial aid.

Addressing funding gaps in real time

As borrowing limits tighten, timing matters as much as total cost. Many scholarships are awarded annually, while graduate students often experience month-to-month cash-flow challenges.

To help address this issue, Edvisors recently launched a $3,000 monthly scholarship for graduate students, awarded on a rolling basis to help offset funding gaps as they arise.

The scholarship is designed to complement, not replace, institutional aid and assistantships. More information is available at Edvisors.com. (Note: I am the chief marketing officer of Edvisors.)

Tax benefits also warrant attention. Credits such as the Lifetime Learning Credit may not reduce upfront costs, but they can lower total out-of-pocket expenses and function as another form of free money.

What students' advisers should watch closely

• Program classification is now a central planning factor, not a footnote
• Timing matters — students who borrow before July 2026 may face different rules than those who begin after
• Competition for scholarships will intensify as borrowing caps push more students toward non-loan funding

This is especially relevant for advisers working with students pursuing degrees such as medicine or law, where perceived program status may not align with federal aid classifications.

The bottom line

Graduate school financing in 2026 will require greater intention and less reliance on automatic borrowing.

Students who succeed will verify program classification early, understand borrowing limits, calculate their true funding gap and build a strategy that treats scholarships and other free money as essential — not optional.

For advisers, the role is clear: Help students confirm classifications, model borrowing limits accurately, identify funding gaps early and prioritize non-loan resources as a core part of graduate education planning.

Related Content

• Here's Why You Can Afford to Ignore College Sticker Prices
• Four Ways to Find Free Money to Pay for College: Affluent Families Can Apply, Too
• Going to College? How to Navigate the Financial Planning
• How to Budget for College Expenses Beyond Tuition
• Why You Should Check Your College's Financial Health

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

We're almost two months into 2026, but it's never too late to set (or reset) your financial goals. And now we are well past the busy holiday season, it may be easier to think clearly about the "need-to-dos" and "nice-to-haves" to create a financial plan.

The key is to start whenever you're ready and to focus on building a realistic plan you can follow over the next 12 months (or any time frame that makes sense for your life).

One helpful way to begin is by choosing a single word as your guiding theme, instead of a long list. It can be anything — just identify what's most important to you.

Maybe it's health: This year, you want to get in better shape, improve your mental health and strengthen your financial resilience.

Or perhaps this is the year defined by education as you look to become more financially savvy and save for your children's college expenses.

Whatever your personal goals, keep that theme word in mind. If you don't pick a destination, you're not really going anywhere, so first find that North Star.

But to make real progress toward it, you'll need to make a road map.

To do that, and to guarantee that you end the year further along than you started, identify three concrete steps toward your theme to spread across the year, each one building on the last.

This process will be the same regardless of your goals, but to illustrate it, let's focus on the theme of "retirement" — because it's the most important thing to get ahead on, and the easiest thing to put off for another year.

Step No. 1: Set up an early win

Once you've determined your theme, figure out the easiest step on that journey. If you can guarantee yourself a win here, you'll not only end up with tangible results — you'll have proved to yourself that you're capable of making progress toward your financial goals.

Often, the reason we struggle is that we've become used to letting ourselves down. So make a promise to yourself and keep it. Learn to trust yourself again.

For retirement planning, there are three big considerations:

• How much will I need?
• How will I spend it?
• What legacy can I leave?

Rather than thinking of this as a single, overwhelming goal, spread the steps across those considerations. The first is about clarifying what you're aiming for.

It's tempting to want to focus on reaching your "number" — or the dollar amount you'll need to save to retire. But there's little point in thinking up a number for its own sake. What's most important is thinking about the life you want to live in retirement.

For example:

• Where do you plan to live — in the U.S. or abroad?
• What income sources will be available to you?
• When does it make sense to claim Social Security, knowing that even a few years' delay can meaningfully increase lifetime income?
• What do you think your health will look like?
• What hobbies do you plan to pursue in retirement?

Adjusting your plans in line with the answers to these questions could be your first step.

Step No. 2: Develop an overarching strategy

Your next goal should be a bit more ambitious.

You might already have your map to retirement. But what about through retirement?

Consider the statistic that on Mount Everest, more accidents happen on the way down than they do on the way up. We have oriented our mindset to say that building our nest egg is the hard part. That's true, but spending it down can be equally tough.

Whether you're 35 or 75, it's essential to build an income distribution plan and test it against your estimates of factors, including taxation and living expenses.

As a hypothetical example, let's say you have a retirement account, an investment account and an annuity, which together give you $2 million to draw from.

• How much and from which of those accounts do you withdraw money to live comfortably?
• Are you taking a little from each account every month?
• If you are, what amount should you take?

The decisive factor here is the taxation of your withdrawals. Taking that money from a traditional IRA is the least tax-efficient option, for example, because every dollar is taxed at the ordinary income tax rate.

Paying attention to how your retirement assets are taxed, and spending them strategically, can make a huge difference in how much income you can have in retirement.

You don't want to relax and say, "I've made it because I have $2 million." Getting to that number is only half the journey, so start planning how you will turn your savings into income as efficiently and effectively as possible.

Step No. 3: Make progress on long-term plans

For the third step in your 2026 plan, you want to take on your furthest-reaching goal. In this example, that could be leaving a legacy to your loved ones or a cause that's important to you. This means moving past step two to figure out what assets you can pass on.

You might organize your will and estate planning documents. According to one study, fewer than a quarter of Americans have a will, and a quarter of those who do have never updated it.

Your goal this year might simply be engaging an attorney. From there, you could have everything done within three months — but you have to take that first step.

Tax efficiency can be important here, too.

For example, proceeds from a life insurance policy are not taxed when the death benefit is paid. This makes it a tax-efficient way to pass on wealth.

You should be careful not to spend the cash inside a life insurance policy down to zero and eliminate that benefit because loans and withdrawals from cash value life insurance reduce the policy's cash value and death benefit and increase the chance that the policy may lapse.

There are also investment vehicles that you shouldn't pass on to your heirs.

For example, an IRA can be the least tax-efficient way to pass money on because, as mentioned above, traditional IRAs are taxed as ordinary income by heirs when they seek to access that money.

Finding your financial North Star

"Retirement" is just one example of how you might approach a theme. If you're having trouble coming up with yours, try thinking beyond, "How much money do I have?"

Think:

• "How secure do I feel in my ability to spend it?" ("Security.")
• "Do I have an emergency plan?" ("Emergencies.")
• "Do I have financial reserves?" ("Resilience.")

Answers to questions like these could help clarify your priorities over the next 12 months.

Related Content

• 4 Simple Money Targets to Aim for in 2026 (And How to Hit Them), From a Financial Planner
• Divide and Conquer: Your Annual Financial Plan Made Easy, Courtesy of a Financial Adviser
• How to Manage Money Like a Millionaire (Even If You're Not One Yet)
• 7 Creative Ways to Spend Less and Save More In Retirement, Courtesy of a Financial Pro
• A Financial Expert's Three Steps to Becoming Debt-Free (Even in This Economy)

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: My father died and left me $250k. I want to use the money for a second home, but my wife wants to earmark it for our kids' college. Who is right?

Answer: By 2048, an astounding $124 trillion is expected to pass from older generations to younger ones. It's been called the Great Wealth Transfer, and it could have huge implications for those who will inherit wealth.

It could be a source of conflict. When an inheritance comes through, it's not a given that you and your spouse will be on the same page as to how to use it.

If you recently inherited $250,000, you might hope to use the money to buy the second home you've always wanted. But if your wife wants to use the money to fund your kids' college education, you might struggle to come up with a compromise.

Here are some important points to consider in the course of making that decision.

Understand the costs of buying a second home

There are many benefits to owning a second home. That property could serve as your personal escape, or it could even become an income stream.

Before you decide whether to use a $250,000 windfall on a second-home purchase vs college, it's important to understand the total costs of buying a second home and recognize that your inheritance might not come close to covering all of them, says David Johnston, wealth management advisor at OnePoint BFG Wealth Partners.

"My first thought when posed with this question was a $250,000 down payment is just the tip of the second home journey," Johnston says.

As he explains, many people underestimate the total cost of owning a second home. In addition to mortgage payments and property taxes, there are home insurance, maintenance, repairs, and potential HOA fees to consider.

Plus, as Johnston points out, "Has anyone bought a place without doing some sort of upgrading? Even a coat of paint?"

Before deciding whether to use the $250,000 on a vacation home, Johnston recommends calculating what you're likely to spend outside of that money and making sure you can afford it.

"In today’s markets, what percentage of a down payment does $250,000 represent?" Johnston says. "I’m thinking quite short of 50%, leading to larger monthly payments, especially with mortgage rates still hovering between 6% to 7%."

Even if you plan to rent out the home to offset your costs, Johnston warns that doing so could lead to higher insurance premiums.

He says, "You’ll likely need to hire a property management company to coordinate the rental calendar, keep the place tidy after each stay, and answer the maintenance calls."

After accounting for all that, you might find that the second home is less affordable than expected, even if you're able to use your inheritance to cover a sizable down payment, furniture, and some initial updates.

Recognize the psychological impact of student debt

Because there are plenty of affordable ways to borrow money for college, you might be inclined to prioritize a second home over your kids' higher education. But Johnston warns that just because your children can borrow for college doesn't mean it's an ideal situation.

"The psychological impact of feeling like you can’t get ahead because of the debt-service albatross is significant," he insists.

"Every dollar your child needs to put toward student loan payments is a dollar not going into their short-term savings," Johnston says. That could make it very difficult for them to build a safety net as young adults, and it could become a huge source of stress.

A recent Pew Research Center survey found that 51% of student loan borrowers don't feel financially secure. Data from ELVTR finds that 54% of Americans have experienced mental health issues due to carrying student debt, while 84% have delayed at least one major life event because of it.

You'll need to decide whether you want to expose your children to the drawbacks of student debt, given that there might now be a way around it.

As Johnston points out, "Depending on the ages of your children, the tax advantages of 529 plans could be impactful. Play by the very-easy-to-abide-by rules, and you gain tax-free growth and tax-free withdrawals."

Figure out your priorities

What makes this situation tricky is that both a second home and paying for college could have a positive impact on your family as a whole. That's why Brian Safdari, founder of College Planning Experts, says it's important to do some soul searching and figure out your priorities.

"Whether you're purchasing a second home or funding your child’s education, each option is an investment that can benefit the family in different ways," he explains.

Safdari says it's important to understand your family's goals before making your decision. If the goal is financial security, both options could lend to that. A second home, for example, could appreciate over time, creating more generational wealth. It could also generate future income to support retirement.

A college degree could be a great investment, too, Safdari says.

"Based on numerous studies and statistics, individuals with a BA or BS degree or higher earn over $1 (million) to $1.5 million more in lifetime income compared to those without a degree," Safdari says.

Ultimately, Safdari says, the right decision is the one that brings your family the most happiness and fulfillment. If you and your wife are struggling to make that choice together, it's a good idea to get some help.

"My advice is to work with a holistic fiduciary adviser who acts in your best interest, helps you evaluate both options, reviews the risks, benefits, and trade-offs, and aligns these decisions with your short-term and long-term financial goals," Safdari says.

Read More

• Student Loans: What the OBBB Means for Parent PLUS Borrowers
• We Bought a Vacation Home for Retirement That We Never Use. Should We Sell or Rent It Out?
• I'm 63 With an Aging House That Needs Repairs. Is It Worth Making Those Fixes?
• I Want to Retire, but I Have to Keep Working so My Adult Kids Have Insurance

It's common for families to treat college tuition like buying a car and to make decisions based on published (sticker) prices. But college pricing is highly individualized.

In reality, the published rate is seldom the actual cost of attendance after financial aid is applied.

For instance, a college might list a tuition fee of $50,000, yet after accounting for scholarships and financial aid, a family might pay $20,000.

This gap highlights why families need to look beyond sticker prices when considering education costs. Understanding the rationale behind these numbers will fundamentally shift your perspective.

Why the sticker price exists (and why it's not the point)

The sticker price matters, but not in the way you might think. Colleges use it as a "list price" to anchor expectations. A high sticker price signals quality and exclusivity and allows strategic aid adjustments.

A school with a $75,000 sticker price can award a $30,000 merit scholarship and still meet its revenue targets. For families, the scholarship feels like a reward; for colleges, it's a pricing tool.

This disparity in what families actually pay sets the stage for a deeper dive into how college costs are determined and experienced by individual students.

Most students don't pay what they see online

One of the most misunderstood dynamics in higher education is how few students pay the published rate. Private colleges now offer tuition discounts that would have been unimaginable 20 years ago.

For example, the average private-college discount now tops 56%, according to the National Association of College and University Business Officers (NACUBO). This substantial reduction in tuition highlights the extent of discounting in today's education landscape and changes the economic equation for many families.

To research discounts, parents can examine reports from organizations including NACUBO and the College Board, which provide data on average discount rates for specific institutions. Accessing these resources empowers families to set realistic expectations and better understand the true costs of attending different colleges.

According to the College Board, financial aid offers are shaped by calculations that consider how well a student fits with the college and whether attending is affordable.

Access to net price calculators helps families look beyond the published price and understand what truly makes a college a good match both culturally and financially.

Aid is a tool to shape the class, manage enrollment and meet institutional goals, not just a reward for academic performance.

Merit aid is not what you think it is

"Merit aid" sounds like an honor. Sometimes it is, but more often, it's strategic.

According to NACUBO, colleges use merit awards to:

• Attract students who will raise the school's academic profile
• Pull in students from competitive geographic regions
• Encourage enrollment from families who can still afford a portion of the cost
• Compete with peer institutions offering aggressive discounts.

This is why two students with similar GPAs can get different packages, and a high-income family can receive generous merit money.

To illustrate, consider Sarah and Emily, both top students in their graduating class. Sarah, hailing from a small town in Montana, receives a substantial merit award for being from an underrepresented region, while Emily, from a densely populated suburb with many applicants, receives a different package despite their similar academic achievements. The award reflects the college's goals as much as student achievement.

Now, let's look at another scenario: James and Olivia, from families with different financial backgrounds but similar academic profiles. James, from a middle-income family, receives aid intended to attract students who can boost the school's diversity. Olivia, from a higher-income family, receives a merit award intended to encourage her enrollment over peers at institutions offering competitive packages.

This example shows how families' financial profiles can also influence the aid received, highlighting the complex strategies colleges use to shape their incoming classes.

Why does the same college cost different amounts for different families?

Families often think cost differences come only from FAFSA eligibility. That's just part of the equation.

What a college offers is influenced by:

• Your financial profile
• The student's academic standing relative to that school
• How much the college wants to increase enrollment in certain majors
• Competition from comparable institutions
• The school's budget and discount strategy for that year

Each of these factors affects the final price. This surprises many families when an "expensive" college turns out to be one of the most affordable on their list.

Families should therefore focus on the net price, not the website number. The actual cost comes after grants and scholarships are factored in, and that number is increasingly personalized.

The key takeaway: Net price is unique to each family and situation. Comparing offers side by side is essential to find true four-year affordability, not just for freshman year.

How to navigate an opaque pricing system

Even though the system is confusing, the main idea is to focus on a few principles to avoid mistakes. Here is a quick-scan checklist for parents during application season:

• Apply broadly and consider multiple options.
• Ignore the sticker price until you have offers, and focus on your net cost after grants and scholarships.
• Remember: You are not shopping for a static price, but for an offer.
• Compare net prices, not tuition, as two schools with identical tuition can differ drastically in aid.
• File the FAFSA and all required forms, even if you anticipate not qualifying. Many grants and merit decisions still require the FAFSA.
• Consider the full four-year picture. Some awards are not renewable, and costs may rise, so forecasting is crucial.
• Read the award letter closely since not all 'aid' is free. Loans and work-study often appear as well.

You can also use tools like the Financial Aid Gap Calculator on Edvisors.com to help you compare award letters and understand your net tuition cost. (Note: I am the chief marketing officer of Edvisors.)

Before using such calculators, make sure you have your award letters in hand, as well as details about any scholarships or grants received. This preparation will make the process smoother and the calculations more accurate.

The current pricing system isn't going anywhere

Colleges have no reason to abandon the high-price/high-discount model. It helps them manage enrollment, signal prestige and shape classes.

Unless federal policy changes aid or caps discounting, families will keep navigating a marketplace where the posted price is more about psychology than reality.

The bottom line

College pricing is not broken — it is just misunderstood. What seems like a fixed cost is actually flexible. Understanding the system's incentives provides greater clarity and reduces anxiety.

The sticker price may be prominent, but the most crucial takeaway is that the real cost is the personalized net price in your award letter, often much lower than expected.

To turn this insight into immediate action, here are a few steps parents can take today to feel more confident about college financing:

• Review last year's award letter or log into your student portal to compare financial offers. Knowing these details can start you on the path to securing the best possible aid for your educational journey.
• Create a comparison chart with at least three different college financial offers to visualize where the best value lies.
• Gather all relevant financial documents, such as FAFSA results and income statements, to prepare for any upcoming meetings with financial aid officers.

These actions will help you navigate the college pricing landscape more effectively, ensuring that you maximize the financial opportunities available to your family.

Related Content

• Sending a Child to College? 10 Money-Saving Tips and Tricks
• How to Budget for College Expenses Beyond Tuition
• 529 Plans: Everything You Need to Know
• One Family's 529 Journey: A Guide to Smart College Savings, From a Parent Who's Also a Financial Professional
• Four Ways to Find Free Money to Pay for College: Affluent Families Can Apply, Too

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

College enrollment has been declining for more than a decade, especially after 2010. That story is well known by now. What's less understood is what has happened underneath that trend.

Even with fewer students going to college overall, completion rates have improved. According to data from the National Student Clearinghouse Research Center (NSCRC), six-year completion rates have risen across most sectors since 2010 — most notably at community colleges.

And even though total enrollment is lower, the number of younger adults earning bachelor's and graduate degrees has steadily increased. Fewer people are entering college, but more of those who do are finishing.

There are two reasons for this shift.

First, many colleges have spent the past decade prioritizing completion — streamlining degree pathways, improving advising, adding intrusive outreach and building academic and financial support systems that simply didn't exist 10 or 15 years ago.

Second, the students historically least likely to finish may now be opting out of college altogether. When that group doesn't enroll, the remaining population appears stronger on paper, mechanically nudging completion rates upward even if no real improvement occurs.

But this positive trend has slowed. The latest numbers show a plateau. The six-year completion rate for the fall 2017 cohort was essentially unchanged from the 2015 cohort, and completion declined in all four-year sectors for that specific group.

So the concern is no longer "why are fewer students enrolling?" but "how do we keep the ones who do?"

And that's where financial aid becomes a make-or-break factor.

Why students leave college

Roughly 60% to 62% of first-time college students earn a credential within six years, according to both NSCRC and the National Center for Education Statistics. That means nearly 40% take longer, remain enrolled without finishing or drop out.

When researchers ask students why they left, the answers are remarkably consistent across studies:

• It wasn't the coursework
• It wasn't academic difficulty
• It was a financial strain

According to Trellis Strategies, 67% of students work for pay while enrolled, and four out of five of those students work more than 20 hours a week. Other studies show 58% to 70% of undergraduates work at least part-time.

No matter how motivated a student is, this combination — tight budgets, long work hours and unpredictable costs — directly affects momentum, credit load and the likelihood of finishing.

Families need more than 'fill out the FAFSA'

Parents and students hear the same advice every year: Complete the Free Application for Federal Student Aid (FAFSA), look for grants and apply for scholarships.

All of that is necessary, but not sufficient. The aid landscape is more complicated than that, especially when it comes to understanding which funding actually continues beyond the first year.

A recurring point of confusion is the difference between one-time grants, renewable grants and project-based awards.

One-time grants. Many grants — especially private or special-project awards — are explicitly one-time. They cover a single year or a specific purpose and do not renew. These can be incredibly helpful for year one, but families should not build multiyear plans around them.

Renewable grants. Some grants are renewable, but "renewable" does not mean "automatically renewed." Students usually must reapply or meet yearly requirements. GPA thresholds, enrollment intensity and financial need can change the award amount. Even federal Pell Grant recipients must submit the FAFSA every year and maintain eligibility.

Very few grants are renewed by default. That nuance matters when families map out costs for four or more years.

Project-based or institutional grants. These are tied to a particular academic initiative, research project, or institutional priority. When the project ends, the grant ends — even if the student's need continues.

All of these grants come with a Notice of Funding Opportunity (NOFO) or award letter, which explicitly states:

• Whether the funding is one-time or renewable
• Eligibility rules for renewal
• Conditions that can increase or reduce the award
• Whether reapplication is required
• Contact for questions

Most students never read this fully — families should.

What can families do to protect completion?

Here's the part that matters: Practical steps families can take right now, grounded in how the financial aid system actually works.

1. Build a four-year cost map, not a one-year snapshot

Use tools such as:

• College net price calculators on each school's website
• College Scorecard for completion and earnings expectations
• Edvisors.com planning tools for comparing four-year costs, grants, scholarships and loan scenarios (I am the chief marketing officer at Edvisors.com)

Families who understand the trajectory of costs — not just the first bill — make better decisions.

2. Create a renewal checklist for every aid type

For each grant, scholarship and loan, list:

• Renewal requirement (if any)
• GPA or credit minimums
• FAFSA deadlines
• Whether financial changes require an appeal

A lot of drop-outs happen because students don't realize a grant disappeared until after the charges hit.

3. Keep a running list of emergency aid options

Many colleges now offer:

• Micro-grants
• Emergency completion grants
• Short-term tuition coverage
• Food or housing support
• Transportation funds

Families should identify these before a crisis, not during one.

4. Be realistic about work hours

A student consistently working 25 to 30 hours a week while taking full-time credits is at a higher risk of stop-out.

Families can:

• Encourage seeking predictable-schedule employers
• Explore campus jobs
• Use summer sessions strategically
• Ask the aid office about credit-load impact before dropping classes

Academic momentum is one of the strongest predictors of completion.

5. Make FAFSA renewal automatic

Put reminders in calendars for:

• FAFSA opening date
• Priority deadlines
• Document deadlines
• Loan counseling or entrance/exit requirements

Late FAFSA = late awarding = late decision-making = higher risk of melt or stop-out.

6. Use scholarship search tools consistently, not once

Instead of "search once and forget," treat scholarship applications as ongoing. Look for:

• Monthly scholarship cycles
• Renewable scholarship opportunities
• Departmental or major-specific funding
• Local and regional awards with lighter competition

Many students only look for scholarships during their senior year of high school. They leave money on the table every year after.

The real message for families

Enrollment matters, but completion matters more. The last decade has shown that colleges can move the needle when they intentionally design for persistence, but the burden can't sit entirely on institutions.

To be better positioned to help students finish the journey — from the first day of enrollment to the first job after graduation, families should understand:

• How multiyear cost structures work
• How to interpret (and not assume) grant renewals
• What the data actually says about why students leave and
• Which resources exist now to buffer financial instability

Financial aid can be a driver of completion, but only when families have a clear view of the entire financial landscape, not just the first step.

Related Content

• Going to College? How to Navigate the Financial Planning
• A 529 Plan Strategy That Could Help Boost Your Financial Aid
• The New Rules for Student Loans
• ​​Are Scholarships Always Tax-Free? What You Need to Know
• Four Ways to Find Free Money to Pay for College: Affluent Families Can Apply, Too

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

With college costs outpacing inflation, even affluent families are rethinking how to pay less out of pocket during National Scholarship Month, which is this month.

The assumption that "we make too much to qualify for aid" is one of the costliest misconceptions in higher education.

In reality, billions of dollars in scholarships, grants and state workforce incentives are available — many with no income restrictions at all.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

The families who benefit most aren't the ones who spend hours filling out random scholarship applications, but those who approach funding strategically, much like portfolio management.

Here are four overlooked avenues of "free money":

1. Merit aid as the new recruitment tool

Colleges are increasingly using merit scholarships to attract high-performing students, regardless of their financial need.

At many universities, 22% of all undergraduates receive merit-based aid. Some private institutions and regional universities offer non-need-based aid to half or more of their full-time students as a competitive strategy to attract specific applications.

These institutional awards serve as tuition discounts, some renewable for up to four years.

Families can gain an advantage by building a list of target schools where their student's academic profile (GPA, test scores, extracurriculars) lands in the top 25% of admitted applicants.

Many institutions publish "automatic merit" charts showing thresholds for guaranteed awards.

A strong GPA and solid test performance can translate into five-figure savings per year — making merit a powerful lever even for wealthy households.

2. Skill-based scholarships in high-demand fields

Not all scholarships are based solely on grades or financial need. Many reward skills and interests that align with the future workforce. For example:

Cybersecurity and IT. The CyberCorps Scholarship for Service pays full tuition and a living stipend in exchange for federal service after graduation.

Semiconductors and engineering. Schools like the University at Albany offer scholarships funded under the CHIPS+ Act to train engineers for the microelectronics industry.

Esports and digital media. Over 300 colleges now offer esports scholarships that can stack with academic awards.

These programs focus on ability, not income, and often lead directly to internships or guaranteed job placement.

3. State 'Workforce' and 'Promise' scholarships

Nearly every state now funds "last-dollar" scholarships that cover tuition gaps after other forms of aid have been applied. Many are tied to high-demand fields such as health care, teaching and public safety.

Some examples:

• New York state's Scholarships for Academic Excellence award scholarships of $500 and $1,500 per year to students achieving academic excellence while in high school.
• The Kansas Promise Act Scholarship covers tuition for designated programs like logistics, nursing or cybersecurity if recipients work in-state for two years after graduation.
• The Maryland Workforce Shortage Grant supports majors in education, therapy, social work and other public service areas.
• The New Mexico Opportunity Scholarship covers up to 100% of tuition and required fees at public colleges for eligible residents.

These programs are structured for accountability: In exchange for service or residency commitments, students can graduate debt-free or with minimal debt.

To learn more about available scholarships and grants within your state, visit Edvisors.com to access links to scholarships and grants per state.

4. Employer tuition benefits (for students and professionals)

Employer-funded education is one of the most underused forms of "free money." Some examples:

• The Starbucks College Achievement Plan covers 100% of tuition through Arizona State University's online degree programs.
• Walmart's Live Better U program pays tuition and for books at partner schools nationwide.

Some of these opportunities are also available to dependents or part-time employees.

For professionals pursuing graduate degrees, many companies offer $5,000 to $10,000 annually in tax-advantaged tuition assistance — a benefit that can be paired with scholarships and 529 funds.

Strategic families utilize these employer programs as an asset class — layered on top of merit and grants — to minimize cash flow strain.

Integrating scholarships into a total funding strategy

For high-net-worth households, the real advantage comes from coordination — aligning scholarships, 529 plans, grants and savings into a coherent strategy.

A few high-yield moves:

• File the FAFSA anyway. Many merit and state programs require it, even if you don't qualify for need-based aid.
• Time your 529 withdrawals. If your student secures substantial merit or state aid, you can preserve 529 funds for graduate school or later years.
• Leverage credible planning tools. Resources available on Edvisors.com, where I am the chief marketing officer, help families compare college costs, explore scholarship options and understand how aid packages interact with personal savings.
• Know each college's stacking policy. Some institutions cap total aid at tuition cost; others allow overage for housing or books. Always verify in writing.

This disciplined approach transforms scholarships from a side pursuit into a core component of financial planning.

Quick wins for National Scholarship Month

Audit your college list for automatic merit. Check published grids and note eligibility thresholds.

Target workforce-aligned programs. Identify three scholarships linked to your student's intended major.

Explore employer partnerships. A part-time or summer job with an education benefit can offset thousands in tuition.

File the FAFSA before year-end. It's the single-most-efficient eligibility trigger for all types of aid.

Document your student's "skills profile." Compile achievements — coding contests, leadership roles, athletics — that strengthen competitive awards.

Bonus tips: How to negotiate a merit bump

Time it right. Wait until your student receives multiple admission offers. Colleges often have flexibility during late winter when they're finalizing enrollment numbers.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Be specific, not emotional. Send a short, professional email to admissions that says something like, "We're grateful for the $12,000 scholarship offer. [Competing university] has offered $15,000. Is there any room for adjustment?"

Most schools will re-evaluate awards if the student fits a high-priority profile.

Confirm renewal terms. Many scholarships require maintaining a minimum GPA or credit load. Always get renewal criteria in writing to avoid surprises later.

The bottom line

"Free money" isn't about luck — it's about alignment.

By blending scholarships, state programs, employer benefits and strategic timing, even affluent families can significantly reduce college costs without sacrificing investment goals or liquidity.

In the end, the smartest move isn't chasing the biggest award — it's treating college funding with the same precision you bring to every other part of your financial life.

Related Content

• How to Budget for College Expenses Beyond Tuition
• Going to College? How to Navigate the Financial Planning
• Why You Should Check Your College's Financial Health
• Best 529 Plans of 2025
• Sending a Child to College? 10 Money-Saving Tips and Tricks

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When Congress established 529 plans in the 1990s, they were designed as a tax-advantaged tool to save for college.

Contributions to these investment accounts grow tax-deferred, and you can withdraw funds tax-free for qualified college expenses, such as tuition, room and board, computers, and books. Most states and Washington, D.C., also offer a tax deduction or credit for residents who contribute to their state's plan.

Over the years, tax-free uses for 529 funds have expanded to include some other educational costs, too, including apprenticeship programs and tuition for kindergarten through 12th-grade schooling. The One Big Beautiful Bill Act, signed into law over the summer, has further extended the ways you can use 529 money, including a wider range of postsecondary educational programs.

What's covered by 529 plans now

Under the new rules, you can now withdraw 529 funds tax-free for tuition, books and other fees associated with qualifying non-degree credential programs, including for plumbing, electrical work, HVAC and welding.

Programs listed under the Workforce Innovation and Opportunity Act generally qualify; you can look up your state's directory of WIOA-eligible programs on CareerOneStop, the U.S. Department of Labor's career, training and job-search website. You can also check for eligible programs in the Web Enabled Approval Management System (WEAMS), maintained by the Department of Veterans Affairs.

Additionally, withdrawals from a 529 are tax-free for certification and licensing expenses and for continuing education required to maintain those licenses. For example, you may use funds to prepare for and take exams required to practice law or become a certified public accountant. Professionals such as teachers, nurses and real estate agents may use 529 money for continuing education to retain their licenses or certification.

If you've been saving money in a 529 for your child, these new rules broaden the options for how they can spend the funds. Or, if you need to take continuing-education courses for your current job or want to learn new skills for a career pivot, you could benefit, too, says Mary Morris, CEO of Commonwealth Savers, Virginia's program for tax-advantaged education savings.

You can change a 529 plan's beneficiary to another member of the family. So if your child doesn't need all the money in their account — say, because their educational expenses were lower than expected — you could switch the beneficiary to yourself and use the funds for your own education.

Note that provisions in the Big Beautiful Bill Act also let families use up to $20,000 per year for elementary and secondary school tuition, course materials, tutoring, fees for standardized tests, and more. Previously, qualified withdrawals of 529 money for K-12 students were limited to tuition, up to $10,000 annually. (The $20,000 limit starts in 2026.)

Not all states have altered their rules to follow the federal government's expanded uses for 529s, so make sure to check your state's policies.

The Roth option for 529s

Keep in mind that thanks to the SECURE 2.0 Act, passed in 2022, there's another way to put leftover 529 money to good use. You can roll over the funds, up to a $35,000 lifetime maximum, into the 529 beneficiary's Roth IRA, tax- and penalty-free.

Rollovers must be within the annual Roth contribution limit, which was $7,000 in 2025 and is $7,500 for 2026. The 529 plan must have been maintained for the beneficiary for at least 15 years before you can do the rollover.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• 529 Plan Contribution Limits
• Use the 529 Grandparent Loophole to Maximize College Savings
• Best 529 Plans

Question: I want to help pay for my grandkids' college. Should I make a large lump-sum 529 plan contribution or spread the funds out evenly over the years?

Answer: A lot of people experience sticker shock when they sit down to look at college costs today. For the 2025-2026 academic year, U.S. News & World Report puts the average cost of tuition and fees at a four-year public in-state school at $11,371.

For a public out-of-state school, the average price tag is $25,415, and for private universities, it's $44,961. A top-notch school may even cost over $90,000 a year!

Meanwhile, an estimated 42.8 million people today owe federal student loan debt, according to the Education Data Initiative, which also reports that the average public university student borrows $31,960 to get a bachelor’s degree.

A late 2023 Bankrate survey found that 59% of student loan borrowers felt forced to delay key financial milestones because of their student debt, including building emergency and retirement savings.

Owing all that money can take a toll. Many student loan borrowers experience high levels of stress and delay major life milestones due to their student debt, according to a 2026 Fidelity Investments research (PDF) report. The study found that 67% of borrowers find their personal finances overwhelming and nearly one third (32%) have delayed purchasing a home due to their debt.

If you’re in a strong enough financial position to help pay for your grandchildren’s education, you might be eager to ease that burden — both for them and your grown children who might also be struggling to set aside money for college savings.

If so, a 592 plan is a good place to start. These plans offer tax-free gains and withdrawals, provided the money is used to cover qualifying educational expenses.

You might wonder if it’s better to make a large lump-sum contribution to a 529 plan now or spread those funds out evenly over the years. You could go either way. It’s important to understand the pros and cons of both options.

The case for megafunding a 529 up front

If you can afford to fund a 529 plan with a lot of money up front, it could pay to do so, says Jonathan Sparling, director at CollegeWell.

As he explains, “Contributions to 529 plans are excluded from an individual's taxable estate, even though the account owner retains control of those funds.”

Moreover, Sparling says, “529 plans are eligible for the super-funding provision, which allows individuals to front-load five years of contributions in one tax year. A married couple could contribute as much as $190,000 per beneficiary, thereby reducing their taxable estate by that amount of money.”

There’s also the benefit of time to consider from an investing standpoint.

“Contributions made to 529 investment plans when a child is very young have more time to accumulate growth and weather market fluctuations. The same is true for 529 prepaid plans, like ones provided by certain states and the Private College 529 Plan,” he says.

With the Private College 529 Plan, Sparling explains, contributions lock in a percentage of tuition and fees at nearly 300 member colleges across the country.

“Making a lump-sum contribution earlier on locks in more years of tuition at a lower rate, protecting against future tuition inflation,” he says.

The case for funding a 529 plan through the years

If you can afford to front-load 529 plan contributions, not only does it give your money that much more time to grow, but it’s also an expense you won’t have to think about year after year.

However, Brian Schmehil, CFP and managing director of Wealth Management at The Mather Group, points out that while you’re generally better off investing a lump sum of money, this approach increases your market-timing risk compared with dollar-cost averaging year after year.

Schmehil also points out that it’s important to consider the tax benefits your state might offer.

“Many states limit the amount you can deduct from your income each year,” says. “Spreading out your contributions can provide a guaranteed tax benefit to you and your family. In some cases, the value of this guaranteed tax benefit may outweigh the uncertainty of market returns.”

Schmehil also says that making contributions on a yearly basis gives you more flexibility if your circumstances, or those of your beneficiaries, change.

For example, you might end up in a situation in which your health care costs increase dramatically later in retirement. One of your grandchildren might decide that once they reach middle school, they’re interested in a specific trade and don’t wish to attend college.

Even though 529 plans give you some flexibility to switch beneficiaries, ultimately, you’ll get even more flexibility by having your money outside one of these accounts.

Any 529 plan contributions you make should go a long way

When it comes to funding a 529 plan, there’s really no right or wrong approach. Sparling also points out that not everyone can make a significant lump-sum contribution to a 529 plan, so for many people, spreading out contributions over time is the only feasible option.

No matter which option you choose, as Sparling says, “Regardless of when contributions are made, every dollar saved for college can help offset future costs and increase college options for their grandchildren.”

Next Steps for Funding Your Grandchild's College Tuition

• Start with the basics:
  • We're 75 With $3.2 Million. Our Grandchild Needs Help Paying for College
• If your grandchild has earned income:
  • How to Open a Custodial Roth IRA: A Guide for Grandparents
• Read up on 529 college savings plans:
  • Use the 529 Grandparent Loophole to Maximize College Savings
  • The Best 529 Plans of 2026

My husband, Tom, has served for 19 years. Currently, he’s a full-time pilot in the Air National Guard, and he previously spent more than a decade as an active-duty member of the Air Force.

Military life comes with plenty of challenges: frequent duty-station relocations, irregular work schedules and overseas deployments, to name a few that we’ve been through. But servicemembers also have access to some significant financial benefits. In recognition of Veterans Day this November, I’m sharing below a few that are impactful for my family.

1. Housing allowance

One helpful perk is a tax-free subsidy, known as the basic allowance for housing, that covers all or part of your monthly rent or mortgage payment if you don’t live in government-provided housing on a military base. The amount you receive depends on the location of your duty station, your rank and whether you have dependents. You can use the BAH calculator to look up the value of your subsidy based on those factors.

2. Free college

The Post-9/11 GI Bill covers the full cost of in-state tuition and fees at public colleges for up to 36 months (four academic years). Or, if you go to a private or foreign college, you get up to a certain amount per year; for the current academic year, the rate is $29,921. The Post-9/11 GI Bill also provides money for housing, books and supplies, and tutors, among other expenses. Those who served on active duty for at least 36 months or meet certain other requirements are eligible for the full GI Bill benefit.

One of the best features is that if you’ve served for at least six years and commit to four more, you can transfer your benefits to your spouse or children. Tom has done that, splitting his benefits so that our two young sons will someday be able to use them for their educational expenses.

3. Retirement security

Military members can use the Thrift Savings Plan, a tax-advantaged retirement plan that’s similar to a 401(k). The TSP has low fees, with the expense ratio on its funds recently ranging from 0.036% to 0.051%. Under the military’s blended retirement system (BRS), which went into effect in 2018, servicemembers get an automatic TSP contribution from the government equaling 1% of their basic pay, plus a matching contribution of up to an additional 4% of pay after you’ve served for two years.

Pensions have become rare in the private sector. But military members who complete at least 20 years of active-duty service are eligible for a lifetime pension, and the payments start when they exit the military. If you retire at the 20-year mark, the government calculates the average of your highest 36 months of basic pay, and under the BRS, you receive a pension equal to 40% of that amount. For each year you serve beyond 20, you get an additional 2%. (Servicemembers who joined before 2018 and did not opt in to the BRS are eligible for a 50% pension when they reach 20 years of service, with 2.5% added on for each year past 20 — but they don’t get government contributions to the TSP.)

4. Low-cost life insurance

Servicemembers’ Group Life Insurance provides coverage at a low rate regardless of the servicemember’s age or health. To get the maximum $500,000 in coverage, servicemembers pay $26 a month in premiums. Spouses can also get coverage of up to $100,000 through Family SGLI; rates vary by age. A spouse between ages 35 and 39 can get $100,000 in coverage for $4.70 a month.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• 10 Best Benefits for Military Members and Their Families
• Thrift Savings Plan Contribution Limits for 2025
• Do U.S. Military Veterans Get Tax Breaks?

Raising a family is one of life's most rewarding journeys, but it's also one of the most expensive.

As of 2023, raising a child from birth to the age of 18 could cost an average of $331,933, according to Northwestern Mutual.

Between child care, housing costs and saving for college tuition, it's easy to feel like you're constantly playing catch-up. As a financial planner and a parent, I know firsthand how overwhelming it can be to juggle it all.

The good news is you don't need to make millions or have a crystal ball to create stability. A few smart financial habits can help make a world of difference. This article contains five important financial tips that every young family should know.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

1. Build a strong emergency fund

Life with kids is full of surprises — some sweet, others not so much. That late-night trip to urgent care, the school laptop that suddenly breaks or the daycare that raises fees without warning … these are the moments when an emergency fund can help keep you afloat.

Aim to save three to six months of essential expenses in a separate emergency account. Think of it as your family's financial airbag. You hope you never need it, but you'll be grateful it's there.

A high-yield savings account is ideal because it's accessible when life happens, yet tucked away from everyday spending needs.

2. Create (and stick to) a family budget

Budgets are just a map of where your money is going and whether it's taking you in the right direction. Begin by tracking your income and expenses, then categorize them into essentials (such as housing, food, child care and utilities) and non-essentials (like streaming subscriptions, eating out and luxury items).

When you see where your money is going, it's easier to cut back in some areas and redirect those dollars to bigger goals. A budget isn't about deprivation. It's about aligning spending with what truly matters to you and your family.

Apps like YNAB, Quicken Simplifi or Monarch make budgeting more user-friendly and less spreadsheet-intensive, although I'm a spreadsheet enthusiast myself.

3. Get the right insurance in place

Insurance may not be exciting, but it can be your family's safety net. Without it, a single event could possibly derail years of progress. At a minimum, young families should prioritize:

• Health insurance to shield against medical costs
• Life insurance to provide for loved ones if something happens to you or your partner
• Homeowners or renters' insurance to protect your home and belongings
• Auto insurance to protect against costly accidents or liability on the road
• Umbrella insurance to cover liabilities above and beyond what your home and auto insurance don't cover

Depending on your situation, there are different kinds of life insurance you can choose from. For young families on a budget, term life insurance is generally a more suitable option over whole life insurance. It's simpler, cheaper and gives you the coverage you need without locking you into an expensive product.

4. Start saving for education early

College may feel light-years away when you're still paying for diapers, but time is your biggest ally. A 529 college savings plan allows your money to grow tax-free when used for qualified education expenses.

Even small monthly contributions can compound into something meaningful by the time your child heads off to campus.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

I encourage grandparents and relatives to make gifts directly to a child's 529 plan during birthdays or holidays. The gift of education lasts longer than a toy your kids will eventually grow out of.

Thanks to the SECURE 2.0 Act, if your 529 account has been open for at least 15 years, up to $35,000 can be rolled over into a Roth IRA. Just one more reason to start early.

5. Invest in your retirement

When you're juggling child care and household expenses, it's tempting to postpone retirement savings. But here's the hard truth: You can borrow for college, but you can't borrow for retirement.

If your employer offers a 401(k), contribute at least enough to capture the full company match, as this essentially amounts to free money. From there, aim to save 15% to 20% of your gross income toward retirement.

If a 401(k) isn't available, look into an IRA or Roth IRA for tax-advantaged growth. Your future self and adult future children will thank you.

Wrapping it all together

There's no perfect playbook for family finances, but these five strategies create a strong foundation. Start with the basics: An emergency cushion, a thoughtful budget, the right protections, and consistent saving for both education and retirement.

And don't forget the bigger picture. Financial planning isn't only about building security. It's also about giving your family the freedom to enjoy the moments that matter most.

The kids are little only once, so while you're building good money habits, make sure you leave room for fun along the way.

Related Content

• Five Money Moves to Make Before Your First Child Arrives: A Financial Guide
• Key 2025 Tax Changes for Parents in Trump's Megabill
• From Piggy Banks to Portfolios: A Financial Planner's Guide to Talking to Your Kids About Money at Every Age
• Navigating the Finances of Fertility Choices and Adoption
• Financial Pitfalls to Avoid in Your 30s, 40s and 50s

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

One of the most talked-about provisions of the One Big Beautiful Bill (OBBB) is the Trump Account.

Available exclusively for the benefit of children under age 18, this account was originally supposed to be a super-tax-advantaged way for young people to save for college, a first home or to start a business.

The final watered-down product, however, more closely resembles a traditional IRA — only without the benefits of tax-deductible contributions.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

As these accounts become available starting in 2026, many clients with young children (and expectant parents) will be asking advisers questions about them:

• How are they funded?
• What do they invest in?
• Are withdrawals taxed?
• How do they stack up to other savings options?

In most cases, other vehicles offer superior tax benefits, higher contribution limits and greater portfolio customization.

Advisers shouldn't be afraid to make these comparisons. But they need to be very careful if the alternatives they recommend to a Trump Account would earn them fees or other compensation. Doing so in a haphazard way could put them in the SEC's fiduciary crosshairs.

Trump accounts: Basic facts

For children born in 2025, 2026, 2027 and 2028, the U.S. government will open a Trump Account for them with a $1,000 contribution.

Starting in 2026, any parent will also be able to establish an account for a child who is under age 18 anytime before the end of 2028.

Once established, parents and other individuals will be able to make after-tax contributions of up to an aggregated total of $5,000 per year.

On top of this limit, employers and qualified charitable institutions will be able to contribute $2,500 to a child's account. These contributions will not count as taxable income.

It's not clear at this point whether this is a lifetime or annual contribution limit.

All contributions will be invested in a single low-cost, broad stock market index fund or ETF.

Earnings will grow tax-deferred until the child can start withdrawing them in the year they turn 18.

Then what?

At this point, it appears that a Trump Account essentially becomes, for all intents and purposes, a traditional IRA.

Like traditional IRAs, withdrawals from Trump Accounts will be taxed as ordinary income. And, like IRAs, the child may be hit with a 10% early withdrawal penalty unless withdrawals are used to pay for qualified expenses, such as:

• Higher education costs
• The purchase of a first home
• Expenses related to recovery from a federally declared disaster

Like an IRA, early withdrawal penalties will be waived once the account owner turns 59½. And, at the moment, it appears that annual required minimum distributions (RMDs) will be required if the account still has assets when the child turns 75.

Since contributions are made after-tax, it's not clear whether account owners will be able to withdraw contributed principal (not earnings) without tax consequences, especially if these contributions were made by someone other than the owner themselves.

What is it good for?

On the surface, the Trump Account looks like an easy way for parents to put away money for their children at an early age to give them a head start on saving for college or retirement.

But when you start comparing the Trump Account to other savings vehicles, its limitations stand out.

There are better college savings options

529 college savings plans allow parents, grandparents and others to make after-tax contributions up to a total aggregated lifetime contribution limit per account that varies by state (on average, it's about $402,000). In 30 states, a portion of 529 plan contributions is state-tax-deductible.

Contributions can be diversified across a mix of stock and bond funds, and all withdrawals are tax-free if they're used to pay for qualified educational expenses.

And these expenses aren't limited to college tuition.

Interested in more information for financial professionals? Sign up for Kiplinger’s new twice-monthly free newsletter, Adviser Angle.

The OBBB now allows tax-free 529 plan withdrawals to pay for K-12 private school tuition, homeschooling expenses, tutoring costs, standardized test fees, educational therapies and post-secondary credentialing programs.

And if there's money left over in a 529 Plan, up to $35,000 in total can be rolled over into a tax-free Roth IRA established by the beneficiary.

Minor Roth IRAs are better retirement savings vehicles

Speaking of Roth IRAs, when a child starts earning their own income, their parents can establish a minor Roth IRA, also known as a custodial Roth IRA, that will allow them to contribute up to the amount the child earns or $7,000, whichever is lower.

The child takes ownership of the account when they turn 18, and any distributions they take after age 59½ will be totally tax-free. And, unlike traditional IRAs or Trump Accounts, RMDs are not mandatory for Roth IRA owners.

Even UGMAs/UTMAs may offer better tax benefits

Uniform Gifts/Transfers to Minors Accounts allow parents to contribute as much as they want to after taxes to establish these custodial trust accounts for their children.

Depending on the custodian, assets can be diversified across stocks, bonds, mutual funds and ETFs.

And while a portion of ordinary income and realized capital gains generated by earnings are taxable, investors (or advisers) can use tax-loss harvesting and strategic cost-basis step-up strategies to reduce investment taxes.

The risks of recommending Trump Account alternatives

Other than serving as a tax-deferred savings vehicle that can be funded as soon as a child is born, Trump Accounts offer few advantages over other kinds of savings accounts.

Investment advisers who agree with this opinion should feel free to express it to clients who ask about Trump Accounts, or express their opinions in public.

But if they recommend any of the alternatives mentioned above, they need to be very careful that their advice doesn't raise fiduciary red flags.

This is most likely to happen if, after hearing these recommendations, a client offers to pay the adviser to manage the investments in one or more of these Trump Account alternatives. Or if the adviser recommends their own managed solution.

In either scenario, the adviser's actions could be perceived as conflicted, since they might materially benefit from this advice.

And since an adviser's fee for managing these alternative accounts will probably be significantly higher than those charged by a Trump Account (whose annual fees cannot exceed 0.1% of the account balance), they may face a fiduciary quagmire in trying to explain how their recommendations are truly in their clients' best interests.

It's unclear whether the SEC will eventually provide guidance to help investment advisers navigate this fiduciary minefield.

So, until there's clarity, advisers may want to ask their firm's compliance officer to proactively develop their firm's rules of the road for guiding and documenting these kinds of comparative discussions.

Related Content

• The GOP Wants to Auto-Enroll Your Child in a Trump Account for Savings
• Three Major 2025 Tax Changes for Parents in 'Big Beautiful Bill'
• Could Trump Accounts Be the Best College Savings Option?
• How Google Reviews Can Help (or Hurt) Financial Advisers
• How Financial Advisers Can Share Their Clients' Good Words

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

After a challenging period in which a redesign led to widespread delays in applying for and receiving financial aid, the Free Application for Federal Student Aid (FAFSA) appears to be back on track.

The new and improved form, which includes changes courtesy of the Big Beautiful Bill passed by Congress this summer, will become widely available for the 2026–27 college year on October 1, its traditional release date.

“The government has repaired all the problems from last year’s FAFSA fiasco,” says Mark Kantrowitz, an expert on student financial aid.

That’s good news for families hoping to score merit- or need-based aid for a college-bound student.

You’ll want to move quickly, though, because aid is often awarded on a first-come, first-served basis. Students who file the FAFSA within the first three months of its release get twice as many grants on average as students who file later, Kantrowitz says.

Changes to the FAFSA form

New to the form this year: an easier way for parents to enter financial information via a simple e-mail invitation from the student, rather than a requirement for the parent to establish a unique ID first.

If you create an account using your Social Security number, you will also now get immediate verification, compared with having to wait one to three days previously.

Plus, as a result of the One Big Beautiful Bill Act, you can once again exclude the net worth of a family-owned farm or small business and, for the first time, a family fishing business as well.

Other recent changes include a simplified form with fewer than 40 questions (down from more than 100) and an increase in the number of colleges to which students can send the application (now 20, up from 10).

Distributions from a grandparent-owned 529 plan also no longer affect a student’s aid eligibility, so families might consider rolling a parent-owned 529 plan over to a new 529 plan in the name of the student’s grandparent to boost aid eligibility.

FAFSA and reporting parental income

Another helpful strategy: Because the FAFSA also no longer considers contributions to a 401(k) or 403(b) account, “You can reduce the income you report on the FAFSA by maximizing pretax contributions to your retirement plan,” says Kantrowitz.

This strategy works best, he adds, if you start increasing your retirement contributions two years in advance of filing the FAFSA.

That’s because, while the FAFSA asks for the value of your bank accounts, 529 plans, investments and other assets as of the day you submit the form, it pulls income information from the tax return you filed two years before the academic year for which you’re seeking financial aid.

That means this October’s application, for the school year starting in 2026, will use information from your 2024 return.

What if your income drops after you’ve submitted your aid application? Says Kantrowitz, “You should always appeal for more financial aid if your financial circumstances change.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• How Grandparents Can Help with Education Expenses
• You Should Be Investing in a 529 Now for Your Kids' or Grandkids' Tuition
• 529 Plan Contribution Limits for 2025

Our nest is now empty.

We recently dropped off our youngest child to start his first year of college. It's been a long journey not just for him and his two older sisters who already earned their bachelor's degrees, but for us as parents.

Our journey to help pay for all our children's college education began soon after they were born, when we opened 529 savings accounts for each of them, set up automatic monthly contributions and automatically raised the amount we contributed each year.

Our 529 accounts have been a key reason we've been able to pay for their college.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

And yet, I learned that most parents are not taking advantage of the benefits of a 529 account for education savings.

In a recent Vanguard survey, 69% of parents reported using a traditional bank savings account for their children's education-related expenses, despite these accounts often offering interest rates trailing the pace of inflation before factoring in taxes.

With September being College Savings Month, I wanted to share some tips for saving for a loved one's education.

Put your oxygen mask on first

It's hard to save for any long-term goal, including your child's education, when an unexpected expense can wreak havoc on your finances. That's why it's important to establish an emergency savings fund for those unexpected expenses before you start saving for other goals.

While you're at it, check to make sure you are putting these funds in a savings vehicle where you are getting the returns you deserve. The average bank's savings account yield is only 0.40%, well below the latest annualized inflation rate of 2.92%.

Consider looking at cash management accounts, with stronger interest rates, such as Vanguard's Cash Plus Account, which can yield nine times more than a traditional bank savings account.

By saving in a high-yielding savings vehicle, you can demonstrate to your children the importance of where you save and the benefits of long-term compound interest while building a savings buffer for unexpected expenses so they do not interfere with your long-term savings goals.

The benefits of 529 plans for education-related expenses

The survey also revealed that only 10% of parents leverage a 529 savings plan for education-related expenses. I'd like to encourage more parents to take advantage of the benefits of 529 plans, if they are able, by sharing how we personally benefited from their investment, tax and flexibility benefits.

From an investment perspective, each state-sponsored 529 plan offers a curated menu of vetted investment options, and most include age-based or Target Enrollment Portfolios that gradually and automatically become more conservative as you approach the date of your child's enrollment year.

It's important to note that a target-date investment is not guaranteed at any time, including on or after the target date.

Many plans offer the ability to set up automatic, recurring contributions and auto-increase your contribution amount on a periodic basis. We took advantage of these features in our children's 529 plans.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

From a tax perspective, the savings grow tax-free and can be withdrawn tax-free as long as you use the funds for qualified education expenses. And some states even provide a state income tax deduction for the contributions you make.

While you can choose any state's plan, I'd recommend checking if your state-sponsored plan offers benefits other states might not and know what type of expenses are qualified, so you don't mistakenly incur a tax penalty.

From a flexibility perspective, 529 plans cover more expenses than you may think. Your investment can be used to pay for tuition, room and board, books and other qualified expenses at any accredited school in the U.S. or abroad.

My oldest daughter attended school in the UK, and her 529 account paid for tuition and room and board, while my son's 529 account paid for a portion of his secondary school education before being used for college.

If college isn't in your loved one's future, you can use your 529 savings account for vocational training in skilled trades, professional licensing, credential programs and continuing education.

You can also change the account beneficiary anytime as long as they're a qualified family member, such as a sibling, stepchild, cousin or parent.

And if you still have leftover money, you can roll up to $35,000 into a Roth IRA, provided certain conditions are met.

Of course, this information is not personalized investment or tax advice — please consult a qualified adviser to understand how 529 plans may impact your individual situation.

It begins with the first step

Every journey — no matter how long — begins with the first step. We are glad we took that first step more than 20 years ago by establishing 529 savings plans and an overarching education savings strategy.

While our nest may be empty, we are grateful to be able to give our birds a better chance to spread their wings and soar.

Related Content

• Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)
• 529s: No Longer the Ho-Hum Investing Device for College
• 529 Plans: Give the Gift of Education (and Compounding)
• I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College Grad
• 529 to Roth IRA: Should You Rollover Unused 529 Funds?

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Big changes are coming to the federal student loan program, and if you're a current borrower, a parent planning for college or someone considering graduate school, it's important to know what's ahead.

The One Big Beautiful Bill (OBBB), which became law in July, represents one of the most significant shifts in student lending in recent memory.

The sweeping budget reconciliation law reshapes how families borrow and repay for higher education. The new rules take effect on July 1, 2026, though some programs will phase out gradually.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

While the updates are significant, there's no reason to panic. With the right information and a clear plan, borrowers can make smart choices that minimize costs and protect their financial well-being.

How federal student loan rules are about to change

The OBBB brings the most substantial changes to federal student lending in more than a decade. There are material changes across undergraduate borrowing, graduate borrowing and repayment options.

For undergraduates, federal Direct Subsidized and Unsubsidized Loans, formerly known as Stafford Loans, remain unchanged.

However, Parent PLUS Loans now come with new limits for the first time: a cap of $20,000 per year and $65,000 in total per student.

Historically, Parent PLUS loans have represented roughly one-third of total federal undergraduate borrowing annually, so these new limits represent a significant shift.

While the caps are relatively generous, the average Parent PLUS loan size was about $21,000 in 2024, meaning families who borrow for all four years of a bachelor's degree, particularly those with multiple children or higher-cost programs, could hit the ceiling and might need to explore additional funding options.

Graduate students face the most notable changes, as the Grad PLUS Loan program will be phased out starting July 1, 2026.

Students who have already taken out a Grad PLUS loan for a specific course of study before that date will be exempt and can continue borrowing under current rules to complete their degree or for up to three years (whichever comes first).

This will impact a decent number of borrowers, as Grad PLUS loans have historically also accounted for roughly one-third of total federal graduate borrowing annually.

To help offset the gap, borrowing limits for federal Direct Subsidized and Direct Unsubsidized Loans will increase by roughly 14% to 23%, depending on the type of graduate loan.

However, even with these increases, many graduate borrowers might need to turn to the private lending market to cover the gap between their cost of attendance and available savings, aid or federal loans.

Finally, repayment options will be simplified starting July 1, 2028. Instead of navigating a complex menu of plans, borrowers will choose between just two:

• A standard repayment plan, with repayment periods of 10, 15, 20 or 25 years based on total debt
• The new Repayment Assistance Plan, an income-driven repayment option in which monthly payments are tied to household income, starting as low as 1% and capped at 10%.

The phasing out of some of the current repayment plans will likely mean higher payments for some borrowers.

Already borrowing with PLUS Loans? Here's what you need to know

If you've taken out a Parent PLUS or Grad PLUS loan, or plan to do so before July 1, 2026, you're in a good position.

You'll be exempt from the new rules and can continue borrowing under the current program structure for up to three academic years or until your degree is complete, whichever comes first.

Even so, this is an ideal time to reassess your borrowing approach. PLUS loans are priced annually, and rates reset each May, so comparing PLUS costs with private loan options could uncover opportunities to save.

Many private lenders allow you to check potential rates using a soft credit pull, which won't impact your credit score.

Before considering PLUS or private loans, make sure you've maxed out federal Direct Subsidized and Unsubsidized Loans, which generally offer the most competitive rates and the most borrower-friendly repayment protections.

All borrowers should explore free funding options such as scholarships, grants and institutional aid — tools such as the Citizens Scholarship Search can help you identify opportunities that reduce the need for additional borrowing.

Planning for college? How to borrow smarter under the new rules

For families just beginning the college planning process, these changes make it more important than ever to understand the net price — what you'll actually pay after scholarships and grants — before committing to a school.

Sticker prices can be misleading, and with new borrowing caps on Parent PLUS loans and the elimination of Grad PLUS loans, it's critical to identify programs that are a good fit both academically and financially.

Tools such as Citizens' College Match can help you compare schools by cost, potential aid and overall affordability (the "net price"), giving you a clearer picture of what's realistic before you apply.

If you anticipate needing to borrow beyond Federal Direct Loans, start rate-shopping early. A soft-pull rate quote from private lenders can show you whether you qualify and at what rate, without impacting your credit.

If your credit profile needs work, this gives you time to improve it or line up a qualified co-signer who could help you secure better terms.

Repaying your loans? How to navigate the new plans

If you're already repaying student loans, there's no immediate action required. You can remain on your current repayment plan until at least July 1, 2028, when you'll need to choose between the Standard Repayment Plan and the Repayment Assistance Plan (RAP).

When deciding, look beyond the monthly payment. Compare how each plan affects your total interest cost, time to repayment and overall financial flexibility.

For some borrowers, refinancing federal loans into a private loan might also make sense, especially if you can secure a lower rate or shorter repayment term.

Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel (formerly known as Building Wealth), our free, twice-weekly newsletter.

Many lenders offer flexible refinancing options with terms ranging from five to 20 years, allowing you to customize a repayment plan that fits your budget.

However, refinancing federal loans means giving up access to such protections as income-driven repayment and potential future loan forgiveness programs, so weigh your options carefully before making a decision.

Plan ahead, borrow smarter

While the changes might feel overwhelming, they also create an opportunity for families to take a more strategic, informed approach to borrowing.

The most important steps you can take right now are to understand your options, compare rates and repayment plans and use available tools to chart the best possible path forward.

With proactive planning, you can navigate these changes with confidence and make choices that support both your educational goals and long-term financial health.

Related Content

• Going to College? How to Navigate the Financial Planning
• This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding Expert
• How the One Big Beautiful Bill Act Will Reshape 529 Plans
• A Little-Known Tax-Free Way to Help Pay Your Student Loan
• The New Rules for Student Loans

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Not long after Monique Showalter had her two sons some 40 years ago, her mother set the tone for how to save for the college education of all her grandchildren.

“She told us, ‘I’ll pay the college tuition and you guys pay for everything else,’ ” Showalter said. “We still had hefty college bills for room and board and all, but it really helped.

“That set a precedent, and I thought ‘I’m going to do that for my grandchildren,’ ” she adds. Today, with five grandchildren ages 3 to 12, and a sixth on the way, she's been socking away about $10,000 a year per child.

She’s not alone. Baby boomers are the most well-heeled group of Americans, holding $85.41 trillion in wealth, according to the Federal Reserve. With that kind of moolah, many are choosing to transfer some of that wealth to their grandchildren while they’re still alive and kicking, says Susan Hirshman, director, Wealth Management for Schwab Wealth Advisory and Schwab Center for Financial Research.

“Years ago, all anyone wanted to talk about was, ‘How much money can I make?’ ” she says. “Now the conversation is more about, 'What do I want to use my wealth for?' and we’re talking a lot about their legacy while they’re still alive and seeing the benefits.”

Education for grandchildren has become a priority, she says. There are a handful of ways grandparents can help foot the bill totally or partially to fund a grandchild’s education, but financial advisers are quick to warn: Don’t drain your retirement fund to do it.

“You can finance education. You can’t finance retirement,” Hirshman says.

1. Let’s get started

Rule No. 1: You have to make sure you're saving correctly for yourself first, accounting for your lifestyle and future wants and needs, as well as having an emergency fund in place and reserves to cover medical and other unexpected needs. No one wants to outlive their finances.

2. The talk

Rule No. 2 is communication with the parents, says Hirshman. “You need to understand what their plans are and how your plans and their plans meet,” she says. “Maybe parents don’t want you to do it or have other ideas.” Know, too, that some steps you might take to help fund college could affect financial aid eligibility for parents or the grandchild.

3. Should you just write a check?

Yes, that's an option. But it’s not the smartest choice when it comes to taxes. If you don’t care about tax deferrals and incentives, remember that the IRS has gift-giving rules. You can bypass those exemptions by writing the check directly to the school, according to the IRS, but that applies only to tuition.

4. The 529 plan

Let’s turn to tax-free options. The most common savings approach is the 529 Plan. These accounts allow you to add as much as $19,000 each year, equal to your full annual gift exclusion, without being liable for capital gains taxes when withdrawing for qualified education expenses.

Contribution limits and deductions vary from state to state, and you’re allowed to have 529 plans in more than one state. The IRS won’t be involved unless you exceed the annual gift allowance. There are no federal tax deductions, but many states offer deductions for in-state plans.

Besides tuition, those funds can be used for fees, books, computers and supplies, as well as tutoring, studying abroad or post-secondary education and more. They’re transferable to another beneficiary, such as a younger sister or cousin.

5. Custodial accounts

This is another savings account path with terrific pros and some serious cons to opening them for children. Under the Uniform Gifts to Minors Act (UGMA) and the Uniform Transfer to Minors Act (UTMA), these accounts allow anyone to contribute cash, stocks, bonds, CDs and several other securities with no limits to the total funds held in the qualified education expenses-only account.

Grandparents — actually, anyone — can contribute as much as the $19,000 annual gift tax exclusion per child, without encountering the attorney fees and other associated costs tied to trusts. But these are taxable investment accounts, and the grandparent is the custodian of the account until the child reaches adulthood. The assets then transfer to the beneficiary, who can use them however they wish. College? Maybe not.

“We’ve all heard the story of the kid saying, ‘I know you wanted me to go to college, but I'm going on a motorcycle trip across Africa instead,’ ” Hirshman says.

6. Coverdell accounts

The Coverdell Education Savings Account is much like a 529 plan, but with income and contribution limits that might offer a good starting point for those with lower modified adjusted gross incomes. In 2026, these are $110,000 for single filers and $220,000 for married couples (unchanged from 2025).

Unlike 529s, Coverdell contributions cannot exceed $2,000 per beneficiary per year, according to the IRS. While two sets of grandparents — or anyone — might open separate accounts for the same child under age 18, the total annual contribution is still capped at $2,000. Also, when the grandchild turns 18, the account and distributions are theirs.

Coverdell accounts can be combined with other education savings accounts, or can be rolled over into a 529 plan without tax implications if it’s for the same beneficiary.

7. Irrevocable education trust fund

Generally used as part of a larger estate plan, it gives grandparents far more flexibility than 529s or Coverdells, and one trust can be created for a number of grandchildren.

The funds are legal arrangements that can generate income that can be taxed, including capital gains that must be addressed by the trustee and later by the beneficiary after the trust is handed over. They’re not as tax-efficient as a 529 or Coverdell, but they can help reduce grandma’s taxable estate by excluding the assets from her estate.

Typically, there are no investment restrictions unless they’re spelled out in the trust. They fall under federal gift tax laws, whether it’s an annual exemption or the lifetime exclusion. That’s why it’s important to have a trustee that you, well, trust.

These aren’t cheap, requiring trustees, lawyers and paperwork, not to mention ongoing maintenance. But the assets are protected in trusts and the flexibility they offer can be compelling.

8. Pay off the student loan

Now there’s a surprise. The grandchild takes out loans to pay for school, and her grandparents take over the payments (no tax deduction) when she graduates.

9. Re-evaluate your plans

In a perfect world, everything you plan in 2026 will play out for the next 20 or 30 years. But, alas, we don't live in a perfect world. That’s why it’s important to update your plans on a consistent basis, double-checking that you’re still on track to meet all your financial and lifestyle goals. Maybe changes will be positive.

10. Just do it

There are many hoops you can jump through to gain tax deferrals and savings, but grandparents can also do it. That’s not to suggest skirting tax laws, but giving your grandchild money here and there over the years, earmarked for college, works, too. It opens the door to dollars getting spent on other things, but at least you tried.

Note: This item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.

Related content

• Best 529 Plans of 2026
• How This 529 'Superfund' Strategy Can Transform Your Estate Plan
• Three Key Ways You Can Help a Child or Grandchild Pay for College
• Eight Easy Ways to Save Money Without Compromising Your Lifestyle

To help you understand what is going on in education, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we publish many (but not all) of our forecasts a few days afterward online. Here’s the latest...

The Kiplinger Letter has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Congress just passed the biggest higher education policy update in two decades. The Republicans’ recent tax and spending law includes new caps on federal loans, new repayment plans and a sweeping accountability system. With most rules set to take effect next July, the Education Department and colleges need to act fast.

To try to lower college prices and student debt, an overhaul of federal student loans is coming. Federal student debt stands at $1.7 trillion, affecting about 43 million borrowers. Half of the debt comes from graduate loans, a big target of the law. Under the new policy, graduate students and parents of undergrads face new caps on yearly and total borrowing. (Limits on loans made directly to undergrads are unchanged.) A simplified loan repayment plan is on tap, which will reap about $270 billion in federal savings over a decade. Two repayment plans, a standard one with fixed payments and a new income-driven plan, spell higher monthly payments for many borrowers.

The new accountability system marks a huge shift. Schools will lose access to federal lending if graduates don’t earn more than nonattendees in the state. Advocates of the system say the goal is to push high-cost programs to reduce their prices. Undergrads will be measured against those with high school diplomas. Grad programs get measured against similarly situated adults without a graduate degree. 20% or more of associate degrees fail this test, per an analysis by Preston Cooper, senior fellow at the American Enterprise Institute. That failure rate comes with a caveat: “Students in these programs are less likely to use loans to begin with,” writes Cooper. “Many will be able to continue operating even if they lose loan access.” Around 8% of all master’s degree programs fail the test (the failure rate is higher for master’s degrees at for-profits). But just 3% of bachelor’s degrees fail.

Among the other policy changes: A bigger endowment tax on wealthy schools of up to 8%, up from today’s top rate of 1.4%. Small colleges with fewer than 3,000 students are exempt, however. And Pell Grants are now available for very short work programs of eight to 15 weeks, a big win for community colleges. Pells also received an extra $10.5 billion in funding.

Schools are racing to adapt and alert students about financial aid changes, though much uncertainty remains. Revenue could take a hit if fewer students enroll, especially at schools that rely heavily on grad programs. Some programs will shrink or be cut, as schools at least consider lowering tuition in some cases.

Expect more business for private lenders, such as College Ave, SoFi, Sallie Mae and Ascent. For example, 40% of medical students borrow more than the law’s annual loan limit. Private loans make up 8% of overall student debt and that figure is sure to increase.

Delays are likely as the Education Department faces implementation struggles. The agency has cut half of its workforce so far and has a lengthy, complex to-do list with tight deadlines. Passing the bill is “just the tip of the iceberg,” says Sarah Sattelmeyer, an education policy analyst at New America. “An incredible amount of work is coming at the Education Department.” This includes issuing reams of rules and guidance about loans, starting the new accountability system, policing lending violations and much more.

Meanwhile, the Trump administration will continue to pressure institutions to change policies, including by withholding current or future federal research funds. Expect more investigations of antisemitism, diversity, foreign students and other issues.

All this change comes as schools face other financial headwinds. A sharp decline in foreign enrollment looms ahead. There’s a homegrown demographic challenge, as the college-age population shrinks in the coming years. Higher costs of everything from construction to insurance are stressing budgets. These trends, and the new policies, mean more schools will mull budget cuts, while also considering sharing resources with other schools or even mergers.

Related Content

• Going to College? How to Navigate Financial Planning
• Trump Targets Student Loan Forgiveness: Here's How Repayments Could Soon Change
• How to Budget for College Expenses Beyond Tuition
• The TCJA: Key Facts and What's Extended for 2025

As college costs rise and financial strategies become more complex, many affluent families are asking if 529 plans are still the smartest way to save for a child's or grandchild's education.

The short answer? Absolutely.

529 plans remain the gold standard for education savings — particularly for high-net-worth families who value tax efficiency, flexibility and long-term planning.

But like all financial tools, 529s work best when they're part of a broader, multilayered strategy tailored to your family's unique goals.

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

Here's why these plans are so powerful — and when you might consider complementing them with other approaches.

Why 529 plans still reign supreme

What makes 529 plans so effective is simple: tax-free growth and tax-free withdrawals for qualified education expenses. No other investment vehicle offers this combination of benefits specifically for education savings.

But the advantages go even deeper for affluent families:

Estate planning leverage. Contributions are considered completed gifts and are removed from your taxable estate — ideal for grandparents who want to reduce estate size while supporting future generations.

Front-loading flexibility. In states that offer a tax deduction for 529 contributions, front-loading five years' worth of gifts can provide a meaningful tax benefit.

It also gives the assets more time to grow tax-free, maximizing the long-term impact of your contributions.

Financial aid optimization. Compared with taxable brokerage accounts, 529 plans are typically treated more favorably in the financial aid process.

When a grandparent owns a 529, the account is not reported on the FAFSA, which can improve a student's eligibility for need-based aid.

More uses than you might think. Funds can be used for K-12 tuition (up to $10,000/year per student), and unused funds can be rolled over to a Roth IRA for the beneficiary — up to $35,000 over five years under the SECURE 2.0 Act's rules.

There are many stipulations that come with these transfers for them to be compliant, but this is a great way to utilize overfunding.

Portability. A common myth is that you must use the 529 in your state. Not true — plans are portable across states and schools, though tax benefits vary by state.

When you might want more than a 529

While 529 plans should serve as the cornerstone of your education savings strategy, they might not be the only tool you need — especially if you're planning for multiple children or grandchildren, navigating uncertain educational paths or seeking greater control of how and when funds are used.

In these situations, a blended approach can offer valuable flexibility. We often recommend funding 50% to 75% of the expected education cost into a 529, with the remaining balance placed in a taxable brokerage account.

This allows families to benefit from the tax-free growth and estate planning advantages of the 529 while preserving access to funds for nonqualified expenses or alternative education plans — such as study abroad, gap years or post-grad programs.

However, it's important to keep in mind that they could trigger capital gains taxes when funds are withdrawn.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

To further support your goals, the following is a range of other complementary tools that you might consider:

• UGMA/UTMA custodial accounts. Useful for continuing family gifting beyond 529 limits, these accounts eventually transfer control to the beneficiary — typically at age 18 or 21, so they might not be appropriate in every situation.
• Education trusts. For families with complex legacy goals or special needs considerations, trusts provide added control, oversight and structure to ensure funds are used as intended.
• Direct tuition payments. Grandparents can pay a school directly without triggering gift tax limits. This strategy can both reduce their taxable estate and make an immediate, meaningful impact.

Together, these tools help create a more adaptable education funding plan — one that supports your child's or grandchild's ambitions without sacrificing financial control or long-term tax efficiency.

Education planning as a legacy tool

For many affluent families, education planning is about far more than paying tuition — it's about creating a lasting legacy.

A well-structured 529 strategy allows families to pass on wealth with intention, aligning financial gifts with deeply held values such as opportunity, education and self-sufficiency.

Annual contributions to 529 plans serve a dual purpose: They fund a meaningful cause while efficiently moving appreciating assets out of the donor's taxable estate.

For grandparents in particular, this is an opportunity to witness the impact of their wealth during their lifetime — something many of our clients find far more rewarding than a posthumous transfer.

Grandparents can contribute annually to multiple 529 plans — one for each grandchild — as part of a broader multigenerational giving strategy.

This not only spreads wealth in a tax-efficient way but also sets the tone for how future generations view education, financial planning and the family's broader legacy.

By taking advantage of front-loading provisions, donors can superfund each account with up to five years' worth of gifts at once, jump-starting tax-free growth and giving those assets more time to compound.

When paired with other estate planning tools — such as trusts, gifting strategies or direct tuition payments — 529 plans become a cornerstone of an integrated approach to legacy planning.

Best practices for maximizing your 529 plan

If you're ready to build or refine your education funding strategy for your family and loved ones, consider these tips:

Choose low-cost, state-run plans over higher-cost adviser-sold options. State-sponsored plans often come with lower fees, which means more of your money stays invested for growth. Be sure to compare expense ratios and long-term performance.

Research state-specific benefits. Some states offer added perks — such as Pennsylvania's SAGE Scholars program, which provides tuition discounts at participating schools — that can enhance the value of your contributions.

Avoid overfunding. Contribute what fits comfortably within your budget. Prioritize your retirement savings first, then allocate additional funds toward education as your financial picture allows.

Review your plan annually. Your child's needs and your financial goals can shift. Revisit your 529 plan regularly to adjust contributions, update beneficiaries and ensure your investment strategy is still aligned.

Ask smart questions. Talk with your adviser about plan costs, tax implications, financial aid considerations and backup strategies for unused funds. A well-informed plan is a more resilient one.

Ultimately, education planning is more than a financial strategy — it's a structured, purpose-driven way to transfer wealth that reflects your values and strengthens your family's future.

A well-structured 529 plan offers meaningful advantages, but the most effective approach often blends it with other tools tailored to your unique goals.

Done thoughtfully, education planning becomes a powerful way to stay connected to the lives and aspirations of your children and grandchildren — building not just financial security, but a lasting legacy of opportunity.

Related Content

• 529 to Roth IRA: Should You Rollover Unused 529 Funds?
• Best 529 Plans of 2025
• 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Going to College? How to Navigate the Financial Planning
• How to Budget for College Expenses Beyond Tuition

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Every year, June is a month for "dads and grads," and this year was particularly poignant for me, as the dad of a high school graduate and a college graduate. Our middle daughter graduated college and just started her first, as she puts it, "big-girl job."

Instead of piecing together a handful of part-time jobs around her school schedule, it's her first full-time job with a full-time commitment.

She's excited about the prospect of a steadier paycheck, as it opens the potential for long-term financial success, but she's also a bit nervous about some more serious adulting.

Perhaps you have a child, grandchild or someone you hold dear who is also just starting out. How can you help them transition to financial independence?

The Kiplinger Building Wealth program handpicks financial advisers and business owners from around the world to share retirement, estate planning and tax strategies to preserve and grow your wealth. These experts, who never pay for inclusion on the site, include professional wealth managers, fiduciary financial planners, CPAs and lawyers. Most of them have certifications including CFP®, ChFC®, IAR, AIF®, CDFA® and more, and their stellar records can be checked through the SEC or FINRA.

I'd encourage recent graduates to focus on three areas: Developing an emergency savings fund, taking advantage of their employer's 401(k) match if they offer one and making disciplined, long-term investments.

No. 1: Develop an emergency savings fund

First things first — start by establishing an emergency savings fund. According to research from Vanguard, having just $2,000 in savings can provide a critical buffer, reducing the likelihood of financial stress and enhancing overall well-being.

This is especially important for those who are new to the workforce, as the financial stress associated with not having emergency savings can spill over into the workplace and impact productivity.

Workers without emergency savings are four times more likely to be distracted at work due to financial stress.

Vanguard's new consumer survey also found that 71% of Americans plan to shift their savings approach this summer to prioritize emergency savings and flexibility, especially in light of current market uncertainty.

With this in mind, it's important to create an emergency savings fund containing at least $2,000 or half a month's expenses, whichever is greater, and to put this money in a high-yielding savings vehicle, like Vanguard's Cash Plus Account, to help you earn stronger returns on your savings.

My daughter's spending account was earning practically zero interest, so she set up a high-yielding savings vehicle, with the account features she desired, to help her earn stronger returns to bolster her savings.

And remember, you don't have to get to your savings goal all at once. Young investors can start small by automating a portion of their paycheck, even $10 or $20, to a high-yielding savings vehicle to help build a savings buffer.

No. 2: Take advantage of your employer's 401(k) match

Retirement may be one of the furthest things from the mind of a young investor — it's a classic "important but not urgent" goal. But if an employer offers matching contributions, it's important to take advantage of them.

Many plans offer matching contributions of 50 cents on the dollar — or even dollar for dollar — up to a certain percentage of pay.

• The match is free money. Any matching contributions from your employer, and their associated earnings, usually become yours over time in a process called vesting
• The money you contribute to the plan is yours — and yours alone — from day one

Find out if your employer offers a matching contribution and make sure you're saving enough to receive the full benefits.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

There are long-term impacts of missing out on employer matches that can compound over time and lead to a significant gap in retirement savings compared to a colleague who took advantage of this match.

And if your employer offers a Roth 401(k) option, younger investors may want to consider choosing a Roth 401(k) over a 401(k) if you believe your current tax bracket will be lower now than when you retire.

No. 3: Make disciplined, long-term investments

The lines between gambling and investing are blurred like never before — and many brokerages are enticing their customers to trade more frequently.

That's why it's important to develop a disciplined approach to long-term investing. Vanguard has always prided itself on its four principles for investing success:

• Create clear, appropriate investment goals
• Keep a balanced, diversified mix of investments
• Minimize cost
• Maintain perspective and long-term discipline

All investors — especially young ones — can leverage these principles in their investing journey. And it's important to remember that all investing is subject to risk, including the possible loss of the money you invest.

Starting a new job brings with it great opportunities and responsibilities. By developing healthy habits now, young investors can set themselves up for long-term financial wellness and independence from the "Bank of Mom and Dad."

Related Content

• A Little-Known Tax-Free Way To Help Pay Your Student Loan
• 529 to Roth IRA: Should You Rollover Unused 529 Funds?
• The Earlier You Take Advantage of Your 401(k), the Better
• Don't Veer Off Course at the First Sign of a Squall in the Markets
• A Frugal Saver's Guide to Spotting Investment Costs

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

With the rapid rise of artificial intelligence, a sea change in cybersecurity is underway. As new threats emerge from generative AI adoption, AI-enabled security tools are also fortifying defenses.

AI’s rise has prompted higher spending on more advanced IT security. In 2025, security spending is set to grow by 12.5% in the U.S. versus last year, hitting $131 billion, according to technology market research firm IDC. Global growth will be similar, led by large companies, but even small businesses are spending more. The top spending sectors are finance, government, telecom and health care, looking to buy tools to secure cloud apps, manage digital identity and analyze cyber threats.

Attacks are worsening across the board, with an increase in speed, scale and sophistication. AI is supercharging phishing emails and voice clones through AI-created text and audio that often trick victims into sharing private info or clicking on malware. Ransomware is on the rise, too. Cyberthreats are growing across the globe. China’s cyber espionage, including targeted attacks, is surging. Iran is using AI to find security flaws to exploit and to spread misinformation online. That’s sure to increase. Russia, too, is using AI for attacks and digital propaganda.

Physical infrastructure remains a ripe target. This includes chemical plants, electric grids, dams, hospitals, transportation systems and nuclear plants. A recent example is China’s Salt Typhoon intrusion into U.S. telecom networks.

Employee use of AI, much of it unsanctioned, gives security pros heartburn. Start with the risk of divulging company secrets as workers share data with public AI chatbots, which may be insecure. Software from Palo Alto Networks and others tracks AI use in a network to protect data and block unapproved AI apps. Other AI threats include “prompt injection” attacks, when an AI chatbot is tricked to override built-in policies, giving access to unauthorized company data or systems. “Hallucinations,” which are inaccurate but true-sounding responses, also pose a security risk.

AI has big promise for improving cybersecurity software, but it brings risk, too. Some things AI can already do: Find security flaws in software and help patch them. Develop software that resists security flaws. Monitor threats, pinpoint real dangers and alert human cyber pros. AI security chatbots can give security staff detailed answers on threats or company policies to help them solve issues.

One of the most exciting developments is “AI agents” that can do security tasks autonomously. Built by companies such as Amazon, Microsoft, Google, CrowdStrike, OneTrust and Radiant Security, the tools can patch security flaws, thwart data breaches, track insider threats, simulate attacks and more. Another use for autonomous agents is issuing employee log-in credentials to a piece of software via email. A tedious task that is now done manually by IT staff.

But there’s fear that autonomous tools will make mistakes or go rogue. These AI agents need to be secure themselves, with clear guardrails and regular audits. “Behind this incredible era of agentic AI are intricate security considerations that organizations must prepare for today,” said Hammad Rajjoub, director of security at Microsoft, at a recent conference. There are already plans for deploying AI agents to guard other agents.

Despite the new AI threats, basic cybersecurity precautions still mitigate risks for businesses. Use strong usernames and passwords, plus another factor, such as a one-time PIN or fingerprint. Regularly update and patch software. Closely vet security vendors and new AI tools. Minimize data stored. Provide regular security training to staff. Prepare a security incident response plan and regularly test it.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Related Content

• What Is AI? Artificial Intelligence 101
• How AI Can Guide Introverts to Success in Professional Services
• AI in Accounting: The Future Is Here
• The AI Doctor Coming to Read Your Test Results
• AI Is Missing the Wisdom of Older Adults

If you have a child who will attend college this fall, their education will go beyond what they learn in class. Chances are, they’ll also get a crash course in how to handle money. Your student may, for example, open a bank account or credit card for the first time. Your child will also need to have health insurance coverage and, if they drive a car, auto insurance. As your student prepares to head for campus, consider how you may manage these areas together.

Banking essentials

If your child doesn’t yet have a checking account, they may want to open one for receiving financial aid money, income from a part-time job, or other funds. Matt Schulz, chief credit analyst at LendingTree, recommends having your child establish an account at your bank so you can quickly and easily transfer funds to their account.

If they opt to open an account at a different institution, however, you can still send money to them. Many banks allow you to make fee-free transfers to checking accounts at other institutions, although the transfer may take a few days to process.

Alternatively, you could use a peer-to-peer transfer service. With Zelle, for example, you can instantly transfer funds directly between your checking accounts as long as at least one of your banks participates in the Zelle network, and transfers are typically fee-free. Other P2P services include Apple Cash, PayPal and Venmo. You can transfer money for free with these services, too. But the funds you send don’t go directly to the recipient’s bank account. Instead, they’re stored as a balance with the service. Moving money instantly from that balance to a bank account usually entails a fee; free transfers typically take up to three business days.

Wherever your child chooses to bank, he or she should look for an account that has no monthly fee and provides fee-free access to ATMs close to their campus. Some banks offer accounts with fee breaks for college students. Chase College Checking, for example, is for students ages 17 to 24 and charges no monthly fee. Chase has more than 15,000 ATMs and more than 4,700 branches across the U.S. Another good option is the Capital One 360 Checking account, which has no monthly fee or minimum-balance requirement and provides access to 70,000 ATMs fee-free.

Compare some of today's top savings rates and other banking products using the tool below, powered by Bankrate.

Building credit

If your child is ready to manage a credit card responsibly, using one in college can give them a head start on developing a positive credit history. Later on, a solid credit profile may help them successfully qualify to rent an apartment, for example, or take out a car loan or mortgage.

One option is to add your child as an authorized user on your credit card, which can help them build credit. As an authorized user, your child can make purchases and, depending on the card, they may gain access to your card’s perks, such as rental car insurance. If you take this route, keep in mind that you’re ultimately responsible for the card and that any missteps from the authorized user — say, racking up a big balance that’s close to your card’s limit — could hurt your credit score, too.

Alternatively, your child could apply for a student credit card with a low limit, which can prevent them from overspending, says Hillary Seiler, a senior certified credit counselor and CEO of the financial education program Financial Footwork. Capital One Savor Rewards for Students, for example, has no annual fee and offers 3% cash back on streaming-service subscriptions and at grocery stores and restaurants. However, interest rates on these cards can be high; the Capital One card, for example, recently charged as much as 29.24%. Your student may quickly face ballooning debt if they fail to pay off the balance every month.

Another possibility is a secured credit card, such as the Discover It Secured Card. With a secured card, you put down a deposit that is equal to the card’s credit line. For example, with a $300 deposit, spending is limited to $300.

Health insurance

By law, your child can remain on your employer or marketplace health insurance plan until they turn 26. For most families, this is the most affordable option.

Even if your child is covered by your policy, their college may automatically enroll them in its health insurance plan to ensure that they’re protected. But these plans can be expensive, averaging $3,000 to $5,000 a year, according to HealthInsurance.org. Make sure to waive that coverage if your child is enrolled in your plan or in another option that better suits their needs.

If your child can’t enroll in your plan, an alternative is insurance through the government’s health care marketplace, at HealthCare.gov. If the child is a dependent on your tax return, your income will determine whether they qualify for a premium tax credit and, if they are eligible, the size of the credit, which lowers the premium. If you don’t claim your child as a dependent, they may be able to get a larger subsidy based on their income, if it’s lower than yours, says Divya Sangameshwar, insurance expert at consumer website ValuePenguin.

At www.kff.org/interactive/subsidy-calculator, you can use the tool from the health policy research organization KFF to estimate premiums and subsidies.

Policies are divided into four categories — bronze, silver, gold and platinum — based on the amount of the premium, out-of-pocket costs and deductible. Generally, bronze plans have the lowest premiums and highest deductibles, platinum plans have the highest premiums and lowest deductibles, and silver or gold plans fall somewhere in between.

Your child can apply for coverage during annual open enrollment, which runs from November 1 to January 15. Or, if your student has a qualifying life event, such as moving to a new area to attend school, they can apply outside of open enrollment.

Car insurance

Because young drivers are more likely than older drivers to be involved in car accidents, their annual auto insurance costs can be considerably higher. According to Bankrate, yearly costs average $5,158 for an 18-year-old male driver and $4,778 for a female driver of the same age. By comparison, the average annual cost of car insurance for a 50-year-old is $2,514.

Greg Martin, president of Think Safe Insurance in Brandon, Fla., recommends that you keep your child on your auto policy, which may allow you to maintain a multi-car discount and lower your child’s costs.

Insurance companies commonly provide student discounts. Progressive Insurance, for instance, offers a discount if your child attends college full-time at least 100 miles from home, is younger than 22 and drives the car only when they’re home during school breaks. State Farm has a Steer Clear discount for those who are younger than 25, haven’t caused any accidents in three years and complete a driver training program.

Explore some of today's best car insurance offers with the tool below, powered by Bankrate.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• Going to College? How to Navigate the Financial Planning
• How to Budget for College Expenses Beyond Tuition
• Why You Should Check Your College's Financial Health

Trump Accounts officially launch July 4, giving families a new way to save and invest for a child's future.

Created under President Donald Trump's One Big Beautiful Bill, the accounts are designed to support long-term wealth building and can be used for a variety of future goals, including higher education and homeownership.

At first glance, Trump Accounts and 529 college savings plans might seem similar. Both allow families to invest on behalf of a child, but they're designed for different purposes and come with different tax rules, contribution limits and withdrawal requirements. Here's how the two accounts compare.

Who can open a Trump Account?

Any child under age 18 with a valid Social Security number can have a Trump Account established on their behalf. Children born between Jan. 1, 2025, and Dec. 31, 2028 may qualify for the program's $1,000 federal contribution if they meet the program's eligibility requirements.

Children who don't qualify for the federal contribution might still have a Trump Account opened and funded by parents, grandparents, relatives or others.

Parents, legal guardians and other authorized individuals can establish a Trump Account for an eligible child by completing IRS Form 4547. The same form is also used to request the $1,000 pilot program contribution for eligible children.

After the election is submitted and processed, the Treasury Department will provide instructions to activate the account. Families can then manage the account through the Trump Accounts website or mobile app.

The adult who establishes the account serves as the responsible party while the child is a minor. Control of the account generally transfers to the beneficiary when the growth period ends and the account transitions to traditional IRA rules.

Trump Account: Tax implications

When opening a savings account for a child or grandchild, tax treatment is a major factor. One limitation of Trump Accounts is that contributions are not tax-deductible, similar to 529 plans at the federal level, though many states do offer tax incentives for 529 contributions.

Unlike 529 plans, which are specifically designed for education savings, Trump Accounts are intended as broader long-term investment accounts for children. Contributions are made with after-tax dollars, and investment earnings grow on a tax-deferred basis while the money remains in the account.

Under current IRS guidance, Trump Accounts eventually transition to treatment similar to a traditional IRA. At that point, distributions might be subject to ordinary income tax, and withdrawals taken before age 59½ could be subject to a 10% additional tax unless an IRA exception applies.

States might also tax Trump Account distributions, depending on local rules. Unlike 529 plans, which allow tax-free withdrawals for qualified education expenses, Trump Accounts don't offer tax-free treatment. Earnings withdrawn from a Trump Account are taxed as ordinary income, even when used for education expenses.

However, because the account is treated similarly to a traditional IRA, certain withdrawals, such as those for higher education expenses or a first-time home purchase, might qualify for penalty-free treatment, although they remain taxable.

For families whose primary goal is saving for college, this difference could be significant. While 529 plans generally reward education spending with tax-free withdrawals, Trump Accounts offer greater flexibility but might result in taxes being owed when money is withdrawn.

Trump Accounts vs other college savings

One of the best ways to determine if a Trump Account would be the right approach for your family is to compare it with other options:

Families focused primarily on paying for college might find a 529 plan the most attractive option because of its tax advantages and higher contribution limits.

Families who value flexibility or have a child eligible for the Trump Account's $1,000 federal contribution might choose to use a Trump Account alongside a 529 plan rather than rely on either account alone.

Coverdell ESAs remain an option for families who want greater investment control, although their lower contribution limits make them less practical for many households.

Trump Accounts: Pros and cons

Whether a Trump Account makes sense for your family depends on your goals, risk tolerance and need for flexibility. Consider the following pros and cons.

Pros:

• $1,000 federal contribution for eligible children born from January 1, 2025, to December 31, 2028
• Families can contribute up to $5,000 annually
• Because Trump Accounts eventually transition to treatment similar to a traditional IRA, certain IRA exceptions may allow penalty-free withdrawals for expenses such as higher education or a first-time home purchase, although taxes might still apply

Cons:

• Families cannot choose their investment options during the account's growth phase
• Withdrawals may be subject to federal and state income taxes
• Early withdrawals might be subject to a 10% penalty unless an IRA exception applies
• Tax and withdrawal rules are more complex than those associated with a typical 529 plan

Choosing the right account for your child's future

Trump Accounts offer eligible children a $1,000 federal contribution and a new way to build long-term savings. However, families focused primarily on college may find that a 529 plan remains the stronger option thanks to its higher contribution limits, broader investment choices and tax-free withdrawals for qualified education expenses.

That doesn't mean families have to choose one account over the other. For newborns eligible for the federal contribution, a Trump Account can provide a government-funded head start, while a 529 plan can remain the primary vehicle for college savings.

Related content

• Everything You Need to Know About 529 Plans
• How the One Big Beautiful Bill Act Could Reshape 529 Plans
• Coverdell ESAs vs. 529 Plans: Which Should You Choose?

To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

AI isn’t just coming for white collar jobs. It’s also quickly being adopted in blue collar fields, taking on administrative tasks to save time, score more sales and boost customer satisfaction.

Many home service contractors have already tried AI for work, especially as it gets integrated into popular trade-specific business software. There’s a growing number of HVAC pros, electricians, plumbers, landscapers, painters, cleaners and home remodelers who use AI regularly.

Tradespeople who are AI users are saving four hours per week on average, according to a recent survey by Housecall Pro, a software platform for trade professionals. The survey found that 40% of their customers are actively using AI, with workers under 35 especially likely to use AI daily. Both big and small companies are part of the trend, even solo operations.

“Our customers are used to using tools in their business and see AI as another tool, like any other tool in their tool bag,” says Roland Ligtenberg, senior VP of innovation at Housecall Pro.

Back-office work
Top uses today include marketing, customer service, scheduling and paperwork. AI tools can automate marketing content for websites or online ads. Housecall Pro’s “Write it for me” tool helps craft website copy, customer responses and emails, simply by providing a short prompt. An AI voice assistant can answer calls 24/7, book a job and put it in the calendar. Customer emails can get automated responses and suggested appointment times. AI-generated reminders, sent via text or email, can help secure a job after giving an estimate.

AI can also help with data entry and financials, such as automated invoices or pricing recommendations. Need to know how many water heaters Joe installed last month, so you can pay him? Just ask an AI chatbot.

Expect AI to soon become standard for many home services companies. Vendors are looking carefully at what may spark more adoption. Some businesses want more information before they trust and understand AI, waiting to see detailed case studies and clear examples of a good return on investment.

A 'one-stop shop' for trades
Besides Housecall Pro, other software vendors with AI include Jobber and ServiceTitan. Housecall Pro’s basic package for one user starts at $59 per month and includes tools for scheduling, quotes, booking, invoices and more, plus access to their AI tech. ServiceTitan has a personalized AI assistant dubbed FieldAssist to answer questions related to your company’s data.

Ligtenberg notes that using AI with Housecall Pro’s cloud platform means companies don’t have to pay attention to confusing and constant AI updates at leading tech companies. As AI models improve, Housecall Pro can swap in any underlying AI tech upgrades to improve voice assistants or other tools. “Our customers just want everything in one place,” says Ligtenberg.

Trade businesses are often experimenting with low-risk tasks first, such as writing marketing copy, where mistakes wouldn’t be costly to fix. Soon, more will shift to more important work, such as scheduling and dispatching, which needs to be highly accurate, to AI tools.

AI can be used for old-school media, too. Housecall Pro’s AI can come up with pithy text for a 4-inch by 6-inch printed postcard mailed to prospective customers, a tried and true marketing practice that local and national trades companies still rely on.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Related Content

• What Is AI? Artificial Intelligence 101
• How AI Can Guide Introverts to Success in Professional Services
• AI in Accounting: The Future Is Here
• The AI Doctor Coming to Read Your Test Results
• AI Is Missing the Wisdom of Older Adults

To help you understand the trends surrounding AI and other new technologies and what we expect to happen in the future, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts. (Get a free issue of The Kiplinger Letter or subscribe.) You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

In past years, schools have raced to adopt smartboards, laptops and learning apps. Now, artificial intelligence is the latest tech craze inspiring high hopes of improving education.

AI teacher training
Already, most teachers are being provided AI training, according to recent research by the RAND Corporation. Three-quarters of K-12 districts will have provided training on AI use by this fall, though the training varies widely and is most often optional. But not dealing with AI isn’t an option as students increasingly use AI tools, such as ChatGPT, on their own for homework and research, and the issue of AI plagiarism gets worse.

Cue a new White House initiative that aims to give K-12 students basic AI competency and to train teachers on best practices. The executive order includes a nationwide competition to highlight top AI uses, a push for public-private partnerships, and new federal funding for AI projects. There will also be a focus on apprenticeships and career options for high schoolers. The goal is to “ensure the U.S. remains a global leader in this technological revolution.”

The new federal effort aims to address one of the big current roadblocks. There is “a scarcity of external experts who are capable of providing appropriate training” for teachers, RAND found. One school leader told RAND that AI best practices simply don’t exist yet: “There are people that are claiming to have the best practices and are making money hand over fist.” The executive order aims to establish comprehensive AI teacher training and professional development.

Pushback from schools and parents
It will be a huge challenge to improve education outcomes with AI, though, as schools are tasked with adding AI in all subjects to students as young as kindergartners. Many schools are struggling to lift test scores back to pre-pandemic levels, and the adoption of AI is sure to be rocky.

Pushback from teachers and parents will be common, with worries about the risks of generative AI and the potential of it hindering learning. AI adoption could come into tension with the push to get smartphones and screens out of classrooms so kids can focus. Plus, measuring AI’s effect on educational outcomes could take years and will require careful tracking and data collection.

But there are lots of potential benefits of AI: Students can get a personalized, conversational tutor. Teachers can get help with administrative tasks, training and curriculum creation. And students graduate with in-demand AI know-how.

Education tech
The trend will open the floodgates to spending on AI education tech. There will be a shift of federal education funding and grants to all sorts of AI efforts, prompted by the recent White House action. Private organizations are likely to spend big on new AI initiatives. Meanwhile, states and local districts will budget more for AI tech. Expect some states to go all-in, while others go slow.

The new AI investment will go to large companies, such as Microsoft and Google; AI labs, such as OpenAI and Anthropic; and a range of edtech players and other start-ups.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

Related Content

• Six Ways to Use AI to Improve Your Financial Life
• The AI Doctor Coming to Read Your Test Results
• How AI Will Impact Our Lives in 2025 and Beyond
• Can Stocks Picked by Artificial Intelligence Beat the Market?

Harvard University recently announced that undergraduate tuition will be free for families earning $200,000 or less beginning with the 2025-26 academic year.

The university joins a growing number of institutions that are expanding financial access to higher education for families who would otherwise struggle to afford it.

The Massachusetts Institute of Technology (MIT) and the University of Pennsylvania, for example, also offer free tuition for families earning less than $200,000.

The University of Michigan waives tuition and mandatory fees for in-state students whose families earn less than $125,000, and the University of Texas does so for families earning less than $100,000.

Many of these tuition-free offerings have strings attached, including state residency requirements (primarily for public institutions), full-time attendance and minimum grade-point-average requirements.

While a tuition-free education helps lessen the financial burden of paying for college, it doesn’t mean attending is cost-free, says Betsy Mayotte, president and founder of The Institution of Student Loan Advisors (TISLA), a website that offers free student loan advice.

Mandatory student fees, which typically cover certain administrative, service or activity costs, may not be included in the tuition waiver.

And housing, food, books, health insurance, transportation and child care might not be part of the aid package, so families have to budget for those expenses, Mayotte says.

These non-tuition expenses can add thousands of dollars to annual attendance costs. At Harvard, for example, undergraduate tuition is $56,550, but the total cost of attendance is nearly $83,000, with about $26,000 for non-tuition expenses, according to the university’s website.

College expenses outside of tuition

It’s a good idea to create a comprehensive budget that accounts for college attendance expenses outside of tuition. These may include:

• Housing and meals (on or off campus)
• Textbooks and course materials
• Computers and other technology needs
• Local transportation costs
• Health insurance
• Travel expenses to visit home
• Club or activities fees
• Personal expenses, such as clothing and household items

Most universities publish these estimated expenses on their websites to help families budget for their all-in costs.

You may be able to reduce the costs by applying for work-study opportunities and external scholarships that cover non-tuition expenses.

Your high school counselor can help you identify scholarships you qualify for, or you can look up options at CareerOneStop.org, the Department of Labor’s online scholarship search tool.

Even if your tuition is covered, fill out the Free Application for Federal Student Aid (FAFSA) form to see what other financial assistance you qualify for, Mayotte recommends.

Federal student loans can provide a safety net in case tuition-free coverage changes unexpectedly or you no longer qualify for it, she adds.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• Going to College? How to Navigate the Financial Planning
• Why You Should Check Your College's Financial Health
• Best 529 Plans of 2025

Anyone determined to help pay for a child’s or grandchild’s education needs to start saving as early as possible, considering how the cost of college continues to skyrocket.

Fortunately, there are ample ways to do so. One of the most popular is a 529 plan, which allows the money placed in the plan to grow tax-free. Withdrawals are also tax-free when used to pay for qualified education expenses, such as tuition, books and room and board.

But as advantageous as 529 plans can be, people sometimes are hesitant to invest in one. After all, this is money dedicated for a specific purpose, a purpose that is often nearly two decades in the future and somewhat uncertain. Plans can change over the course of those years.

What if the child or grandchild chooses not to attend college? What if they earn a scholarship that pays for most or all of their education, leaving an unused balance in the 529? What happens to the money then?

A Roth alternative

At one time, the options were limited. The beneficiary named on the account could use the money for future education expenses that qualified.

For example, if even further into the future they changed their mind and elected to attend college after all, the 529 money would still be there and could be used at that time. Or if they pursued a master’s degree, they could use the money they didn’t need for a bachelor’s.

If future education expenses weren’t on the cards, the beneficiary could access the money –– but at a significant cost. They would have to pay income taxes plus a 10% penalty on any money they withdrew from the account.

Fortunately, as of last year, there are now other alternatives because of the federal SECURE 2.0 Act. One of the new options is to roll over the money into a Roth IRA. The beneficiary can do this without paying any taxes or penalties.

The money then grows tax-free, and when the beneficiary is at least 59½ years old, they can withdraw the money without paying taxes at that time.

This does come with stipulations:

• The 529 must have been opened at least 15 years prior to the transfer to a Roth.
• The Roth must be in the name of the beneficiary designated in the 529 account.
• You can transfer up to $35,000 from the 529 into the Roth, but that entire amount cannot be moved over in one fell swoop. The annual limit to contribute to the Roth is $7,000, so if you did have a full $35,000 to transfer, you would need to do it in $7,000 increments over five years.

What works best for you?

Suddenly, the money set aside for a college education can instead become the start of retirement savings for the young person.

And for some grandparents, creating a 529 plan for a grandchild not only can help that child pay for education expenses, but also can help with the grandparents’ tax planning.

As an example: In Washington state, where I live, there is an estate tax on estates worth more than $2.2 million. One strategy to reduce the amount of the estate tax is to gift money to grandchildren in the form of a 529 plan.

Looking for expert tips to grow and preserve your wealth? Sign up for Building Wealth, our free, twice-weekly newsletter.

Under 2025 tax regulations, you are allowed to gift as much as $19,000 a year to someone, and a married couple can donate double that amount –– $38,000.

The grandchild receives an investment in their future, and the grandparents may be able to worry a little less about the taxes that could come out of what they leave to their heirs.

Perhaps you would have been reluctant to open a 529 account in the past. But with the changes brought about by the SECURE 2.0 Act, the 529 might be more appealing to you.

But whether it’s the right answer for you also depends on your individual goals, needs and circumstances. Your financial professional can help you sort through the pros and cons of a 529 and make recommendations about what might be the best decision.

Ronnie Blair contributed to this article.

The appearances in Kiplinger were obtained through a PR program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Investment advisory services and insurance services are provided through The Retirement Solution LLC, a Registered Investment Advisor.

Related Content

• Best 529 Plans of 2025
• Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)
• 529 Plans: Give the Gift of Education (and Compounding)
• Using a 529 Plan? Here’s What to Keep in Mind
• 529s: No Longer the Ho-Hum Investing Device for College

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

College planning is inherently stressful, a series of crucial choices for both students and their families. However, potential federal changes have introduced additional uncertainty, further amplifying likely anxieties.

While the full implications for Federal Student Aid — the department within the Department of Education responsible for programs including Pell Grants and federal student loans — are still unclear, the Trump administration's proposed restructuring of the Department of Education is causing many families nationwide to brace for potentially significant adjustments to their college planning process.

While trying to stay abreast of potential changes at the federal level — along with the usual college-selection considerations of academic rigor, extracurricular options, cultural and social opportunities, location and chance of admission — another factor looms large. Is the college or university a “financial fit”?

When considering finances, families are faced with two seemingly simple yet complex questions:

• How much will each college program cost?
• How will we pay for it?

Determining your net price

The first step in preparing for the college journey is getting a clear view of how much a program will actually cost, also known as the “net price.” The net price is the total cost of attendance minus scholarships and grants a student may receive.

Start by filling out a Free Application for Federal Student Aid (FAFSA), which will generate a financial profile that includes the Student Aid Index (SAI) — this is the number used by financial aid professionals to determine your eligibility for aid.

However, completing the FAFSA is only one part of the puzzle. Without a financial aid offer letter in hand, it can be difficult to determine other elements of net price, as it may be difficult to discern what financial support is automatically offered based on family income and other eligibility factors.

The college application system can trap families in a costly paradox. You need to apply to learn the true price, but most families can't afford to apply blindly. With application fees soaring, not to mention the time and effort it takes to apply to college, the desire for upfront net price transparency is more than reasonable — it's essential.

The stress of hidden college costs can be overwhelming, but thankfully, solutions exist. Tools like College Raptor's College Match, provide much-needed relief.

In addition to helping identify the right academic fit for college, the tool uses machine learning to offer accurate estimates of attendance costs and potential aid packages.

These tools compile extensive data, giving families a realistic financial preview, eliminating the need to apply blindly and offering clarity before any official forms are submitted.

Other sites, such as the U.S. Department of Education’s Net Price Calculator and The College Board's Net Price Calculator, can also help you determine costs for individual schools.

Net price evaluating tools may also open new horizons into what is financially possible. That dream private college that costs $90,000 and seems out of reach — don’t rule it out. With the right tools, you might discover unexpected financial aid opportunities that bridge the gap.

And the net price evaluating tools should be used at the beginning of the college search process to narrow your application list by providing perspective on both academic and financial fit.

Crafting your paying-for-college game plan

Often, when families think about paying for college, their minds immediately jump to loans, but it is not advisable to treat them as the only option as you figure out how to afford that net price.

Prospective students and families should consider the cost of education over the entire four years. If a family knows that they need to borrow, they should consider Federal Direct Subsidized or Unsubsidized Loans — informally known as Stafford Loans (more on them in the next section) — from the start as the amount available to borrow is capped both per year and in aggregate.

After considering Federal Direct Subsidized or Unsubsidized Loans, consider exhausting all savings, such as a 529 plan, which is a state-sponsored investment plan for education expenses.

In the event that the degree is not completed, it is preferable to avoid taking on additional debt. While the tax-advantaged 529 education savings account has new options to move leftover money into a retirement account, there are limits.

Potential penalties for non-education withdrawals remain, meaning if your student forgoes further schooling, accessing those funds may incur tax consequences, but they will still be accessible.

In addition, strategically delaying taking on student loan debt can offer financial advantages. By postponing borrowing, you minimize accrued interest, reducing the overall cost.

For example, waiting until your sophomore year to take on loans shaves off a year of interest, resulting in long-term savings.

After you have utilized Federal Direct Subsidized or Unsubsidized Loans and/or savings, consider work-study options. Federal work-study programs and/or non-sponsored part- or full-time jobs can help students generate income to directly pay their tuition each semester.

These programs can be a great way to earn money while also enriching your college experience, particularly if you find work that is enjoyable or helps to advance your studies or career goals.

Weighing loan options and benefits

If loans are unavoidable, prioritize Federal Direct Subsidized or Unsubsidized Loans. These loans, aka Stafford Loans, are your best bet. Stafford Loans typically feature highly competitive interest rates and the most borrower-friendly terms, particularly with respect to repayment options and potential forgiveness.

While not everyone will qualify for a subsidized loan, the key advantage of the subsidized loan is that the government pays the interest while the student is in school and during authorized deferment periods, making it a very cost-effective borrowing option.

But if you don’t qualify for the subsidized loan, the unsubsidized counterpart is typically a good deal and has the same interest rate as the subsidized loan.

How much you can borrow with Federal Direct Subsidized or Unsubsidized Loans is capped — both annually and in aggregate. So, if you still have a gap to fund college after these loans, you’ll be left to choose between Federal PLUS or private loans.

This is where doing proper research is crucial. PLUS Loans do not carry the same pricing or benefits as Federal Direct Subsidized and Unsubsidized Loans and are often less competitive than private student loans.

When compared to PLUS Loans, private loans often provide better value and have unique features like multiyear approval and soft credit pulls, which don’t affect your credit score.

Banks that offer private loans can often offer lower rates and better terms for borrowers than PLUS.

However, not all borrowers who would qualify for a PLUS Loan would typically qualify for a private loan or receive a better rate, so you should research the availability of different private options to compare to PLUS.

You should also keep in mind that PLUS Loans have an origination fee, currently over 4%, which is typically not charged by private lenders.

Some banks, including Citizens, where I am the head of Student Lending, will use soft credit pulls that don’t impact your credit score to pre-approve you and provide a rate quote.

It is advisable to look at the rate, but also other features of the loan including borrowing limits, cosigner requirements, repayment options and loan modifications and forbearance policies in the unlikely case you run into a hardship.

It’s also important that you trust the organization from which you are getting your loan, as you are typically entering into a multiyear relationship.

Begin planning as soon as yesterday

In the face of shifting federal policies and ever-rising costs of higher education, proactive planning and informed decision-making are critical.

Families should leverage available tools to demystify net prices, strategically utilize savings and work-study options and carefully weigh loan choices.

This will enable families to navigate the complexities of the college journey with greater confidence, ensuring that the pursuit of higher education remains an attainable and financially sound investment.

Related Content

• 529s: No Longer the Ho-Hum Investing Device for College
• Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Coverdell Education Savings Accounts: A Deep Dive
• How an Irrevocable Trust Could Pay for Education
• Sending a Child to College? 10 Money-Saving Tips and Tricks

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Graduating from college is a big step in your life. You have your whole life ahead of you, and you feel empowered to take the world by the reins. There will be many exciting new paths you can take: getting a new job, moving to a new city or state and, for many, maybe even buying your own place. But before you start on this big adventure, it’s important to first begin by getting your finances in order.

While not necessarily as exciting or fun as traveling the world, ensuring you start off adulthood with a stable financial footing can help make sure you’re able to fund all these new opportunities coming your way and still have the safety and security you need to lead a successful adult life.

If you’re graduating within the next few months — or even within the next year or two — consider the following advice from the financial experts of Kiplinger Advisor Collective to start checking off your financial to-do list and get a head start on living the life you’ve been dreaming of.

Develop a plan for retirement
“The sooner you start investing for retirement, the better off you will be when that day comes. Open up an IRA, Roth and/or a 401(k) and start diligently investing. Even if you can only invest a fraction of the allowed limit, when retirement comes, you will be miles ahead of your peers thanks to the effects of compound growth.” — Greg Welborn, First Financial Consulting

Save cash for emergencies
“These days, having enough cash to ride out emergencies is important. If you can buy high-yield savings bonds, or even yield-enhanced money market funds that are safe to park your cash in without losing it, that would be better. You need to keep some liquidity so you can take advantage of opportunities that may come along in the near future.” — Zain Jaffer, Zain Ventures

Understand how you support your values with your money
“Hone your spending skills by paying attention to how you use money day to day. Start to name your values and keep an occasional spending diary to consider how your spending supports those values. Getting clear on how to use money to support your values early will insulate you from looking to outside sources for the ‘right’ ways to use and manage money, which most likely won't be exactly ‘right’ for you.” — Dana Miranda, YOU DON'T NEED A BUDGET

Start to pay yourself first
“Build the habit of paying yourself first. A mentor once told me, ‘If you don’t save now, you never will.’ Even if it’s just $20 a month, start early. I’ve seen young professionals delay, thinking they’ll save later — but later rarely comes. Automate savings now, when opportunities, not financial stress, define your choices.” — Bob Chitrathorn, Wealth Planning By Bob Chitrathorn of Simplified Wealth Management

Improve your credit score
“Build your credit as soon as possible. Adulthood hits fast, and your credit score affects everything — renting, buying a car and even some job opportunities. Open a low-limit credit card, use it for essentials and pay it off in full each month. Good credit saves you thousands in interest over time, so start now, be smart and set yourself up for financial freedom early.” — Justin Brock, Bobby Brock Insurance

Build your financial discipline
“Develop a savings and investment plan to prepare for any emergencies and opportunities, and be sure to build wealth for the future. It’s never too early to plan! Financial discipline leads you to higher credit scores and more favorable interest rates for loans.” — Marguerita Cheng, Blue Ocean Global Wealth

Related Content

• Four Ways Broke Grad Students Can Raise Their Income While Still in School
• What Is a 401(k) Retirement Savings Plan?
• Saving for Your Emergency Fund: As Easy as 1-3-6
• Like Getting Healthy, Getting Wealthy Requires Good Habits

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Right before Christmas, I came across a study by The Senior List reporting how much grandparents spend on their grandchildren nowadays. The final tally: nearly $4,000 annually, on average.

Yikes! The bulk of that went toward big-ticket expenses, such as school tuition or helping to buy a car. But the list also included gifts for special occasions ($400), clothing or shoes ($300), dining out ($300) and entertainment ($200).

Of course, every family’s circumstances and finances are different. But when I wrote the first edition of my book Raising Money Smart Kids in the 1990s, I offered advice to grandparents in general on how to satisfy their desire to be generous to their grandkids without spoiling them rotten. At the time, my own children were in elementary school. Now I’m a grandparent myself. Because the study arrived in the middle of the holiday shopping season, I decided to revisit the advice of my younger self to see whether I still agree with it — and whether I now practice what I preached.

Whether for Christmas or any other occasion, I think the best piece of advice I gave then, and which I now follow religiously, is to consult with my adult children about what gifts their kids would like — and what they would like the kids to have. Then I can choose things that appeal to me and veto things that don’t. For example, I leave major purchases to Santa or Mom and Dad, unless I’m asked to chip in on a joint gift (such as the tent two of my grandchildren received a couple of Christmases ago).

A number of my grandparent friends use a version of this strategy. For instance, one grandmother felt it was up to her daughter to buy a gaming system for her grandson, but she was willing to buy games. Another grandmother prefers to come up with her own ideas, but if she’s in any doubt she runs them by her son to see if they pass muster.

In my book, I recommended having kids make a wish list of things they’d like but won’t necessarily get, and I still like the idea. Looking through catalogs together is a fun activity, and you can make it a teachable moment by setting price limits or showing the kids how to set priorities.

Digital gifts

One thing that I couldn’t have anticipated 30 years ago was the challenge of the digital age. I’m willing to buy things that require batteries or charging, but I leave the decision to buy tablets and other major electronic devices to parents. I learned that my friends and I all follow a strategy of “mixing it up,” as one woman put it — buying games, books and crafts to divert the kiddos from their devices. One family is planning an RV vacation next summer, so the kids’ grandmother purchased games and activities with a national parks theme to keep them entertained on the road.

Another thing my younger self couldn’t anticipate was how grandkids themselves can clue you in to their interests. My eight grandchildren range in age from 10 down to seven-month-old twins and, depending on their age, they are into trains, Hot Wheels cars, squishy character pillows, art supplies, Pokémon cards, baseball, and books in the Berenstain Bears and Wimpy Kid series. All of these offer opportunities for surprise gifts that aren’t particularly expensive. One of the most popular presents I ever purchased was a spiral notebook with pockets for papers.

Savings accounts

This being Kiplinger, I should also say that my husband and I contribute annually to 529 college-savings accounts for each of our grandchildren. Thanks to the so-called grandparent loophole, distributions from grandparent-owned 529 plans won’t affect a grandchild’s eligibility for federal financial aid.

Got grandkids? Let me know how you handle gift giving and I’ll be happy to share your ideas.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• How Much Does It Cost to Be a Grandparent?
• Four Money Mistakes Even Good Grandparents Make With Grandkids
• 7 Best Stocks to Gift Your Grandchildren

Every year, investors use 529 plans to save for their loved ones’ educations. While this tax-advantaged account has many benefits, one concern has long persisted with parents, grandparents and others: If college plans change, excess 529 plan funds could go unused or be subject to a tax penalty if used for nonqualified education expenses.

Beginning this year, that concern is addressed, thanks to a change in U.S. law. Starting in 2024, 529 plan owners now have the option to use excess 529 plan funds to jumpstart the retirement savings of their beneficiaries.

Please note: Although the change to 529 plans is effective for 2024, the Treasury Department has yet to issue guidance for providers on how to implement the provision, so its availability will likely vary among providers.

An Ameriprise financial advisor will help you evaluate how this change can potentially benefit your family and loved ones.

Find an advisor

Here’s what you need to know about this update to 529 plans:

In December 2022, SECURE Act 2.0 was signed into law to enhance retirement savings opportunities for Americans. One provision — effective in 2024 — allows owners of a 529 plan to move unused funds in the account directly to the plan beneficiary’s Roth IRA.

This option may provide beneficiaries with tax-free retirement money. Previously, if beneficiaries were to use assets in a 529 plan for anything other than qualified educational expenses, the earnings portion of any nonqualified distribution would likely be subject to ordinary income taxes and a 10% penalty.

How does the new law change affect excess 529 plan funds?

What special considerations and limitations should I be aware of?

• 529 plans must be 15 years old to be eligible for Roth transfer: The 529 plan must have been maintained for a minimum of 15 years to be eligible for transfer. Further, contributions made to the 529 plan in the five years before the start of distributions — including the associated earnings — are ineligible for a tax-free rollover. 
• This change benefits the beneficiary, not the 529 plan account holders. The funds from the 529 plan must be moved directly to a Roth IRA of the 529 plan beneficiary.
• Lifetime maximum: The 529 transfer is subject to a lifetime maximum of $35,000 from a 529 plan account to a Roth IRA.
• Roth IRA contribution limits still apply. For 2024, those limits are $7,000 per year if the beneficiary is under 50 and $8,000 per year for those 50 and over. These limits are subject to change every year.
• Roth IRA income limits don’t apply but earned income requirements do. The Roth IRA income thresholds will not apply to these contributions; however, the beneficiary will need to have earned income equal to or more than the contribution to move 529 plan funds into the Roth.
• There are still unknowns: SECURE Act 2.0 is still new, and we expect the Treasury Department to share more detailed guidelines. Individual states may also have their own stipulations regarding rolling over excess 529 plan funds to a Roth IRA. Due do the uncertainty with future guidance, it is unclear when providers will be able to offer the functionality.

I’m an account owner of a 529 plan. Can I update the name of the beneficiary to myself to benefit from this new provision?

If you created a 529 plan for a loved one and have excess funds in the account, you could technically change the beneficiary to yourself, but based on the language in SECURE Act 2.0, this may likely reset the 15-year clock. This means you would need to wait 15 years before you could transfer any 529 plan funds into your Roth IRA.

Government agencies still need to confirm whether the clock will be restarted or not, so there may be unforeseen consequences of initiating a beneficiary change.

How can my family take advantage of this change?

Parents and grandparents can feel more confident about opening and funding a 529 plan. Now, if a student decides to pursue a less expensive educational path or receives more merit scholarships, those 529 plan funds can still be earmarked for their future — albeit in a different way.

This change also presents a unique estate planning opportunity for individuals wanting to make an impact with their legacy. As such, parents and grandparents may choose to increase their 529 plan contributions, or open an account for their loved ones, now that excess 529 plan funds can give beneficiaries a head start on retirement savings.

What are the tax implications of this change?

The transfer of unused 529 plan assets will not trigger any federal taxable event. However, adoption of these new tax provisions may vary from state to state. If a state chooses not to conform, then the transfer potentially may be subject to state income tax.

The most significant tax implications are positive for the beneficiary. Instead of paying taxes on unused 529 assets and incurring the 10% penalty when withdrawn for nonqualified expenses, beneficiary can move their 529 plan funds to a Roth IRA where they grow tax-free if conditions are met.

Take advantage of new rules for 529 plans

Until recently, many parents and grandparents have been careful to not overfund their 529 plans. Now, families and others have more flexibility with these assets and can give their beneficiaries the opportunity to start saving for retirement early.

An Ameriprise financial advisor will help you talk through the 529 plan rule change and help you identify tax-efficient strategies to save for a loved one’s education and beyond.

Find an advisor

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor. Please seek the advice of a financial advisor regarding your particular financial situation.

This article reflects a common understanding of the SECURE Act rules prior to the release of Treasury regulations and should not be relied upon as tax or legal advice.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

Clients contributing to a 529 Plan offered by a state in which they are not a resident, should consider, before investing, whether their, or their designated beneficiary(s) home state offers any state tax or other state benefits such as financial aid, scholarship funds or protection from creditors that are only available for investments in such state’s qualified tuition program.

A Roth IRA is tax-free as long as investors leave the money in the account for at least 5 years and are 59 1/2 or older when they take distributions or meet another qualifying event, such as death, disability or purchase of a first home.

The initial consultation provides an overview of financial planning concepts. You will not receive written analysis and/or recommendations.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.

Third party companies mentioned are not affiliated with Ameriprise Financial, Inc. This content was provided by Ameriprise Financial, Inc. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.

©2025 Ameriprise Financial, Inc. All rights reserved.

Christopher Rose was close to finishing his third year at Fontbonne University in St. Louis last March when the entire student body received a message to meet in the school’s main gymnasium. After the students gathered, the college’s president announced that Fontbonne would be closing at the end of the summer term in August 2025.

“It shook a lot of students,” says Rose. “A lot of kids were in the same position as me, with uncertainty about the future and having to scramble to find a path forward. It had been a close community, like a second home. Everybody worried about financial aid and transferring credits.”

Fontbonne made agreements with 25 colleges that offered to accept most credits and charge students no more than they were paying at Fontbonne. But the disruption of having to change schools and possibly add extra semesters hit the students hard.

Several colleges came to Fontbonne’s campus in April to discuss their programs and transfer process. After meeting with a few schools, Rose decided to switch to the University of Missouri–St. Louis starting in fall 2024. Because the university didn’t offer a marketing major, he had to change his major from marketing to business administration with a concentration in marketing and add an extra year to his studies.

Even though he liked the close-knit community of a small school, Rose chose to finish up at a large public university because he worried about the stability of some of the small schools. “With the financial uncertainty, it was the safest bet for me,” he says.

Colleges throughout the country are struggling financially as enrollment shrinks and expenses rise. Nearly 100 higher-education institutions closed between the 2022–23 and the 2023–24 academic years, according to the Department of Education’s National Center for Education Statistics. Many were for-profit programs or two-year colleges that merged into other programs. But some were traditional four-year colleges with long histories.

Fontbonne University, for example, recently celebrated its 100th anniversary. Founded by the Sisters of St. Joseph of Carondelet in 1923 as a women’s liberal arts college primarily to educate teachers, the school became well known for its deaf-education program. It went co-ed in the 1970s and expanded to 44 under-graduate majors and 19 graduate majors. But enrollment dropped significantly over the past decade — from 1,781 students in fall 2014 to 874 students in fall 2023 — and the school couldn’t keep up financially.

“It became clear to the leadership team that it was too risky to try to continue the institution,” says Adam Weyhaupt, Fontbonne’s executive vice president and provost. “It seemed like the most responsible thing to do was to wind down the institution in an orderly, dignified way.”

Fontbonne didn’t have a large endowment (something it had in common with many colleges). With a significant number of its graduates focusing on careers known for service rather than salaries, such as special education and social work, large gifts from alumni were rare.

The school also took pride in its mission to provide opportunities to students in need: 56% of Fontbonne’s current students are eligible for Pell Grants, and one-third are first-generation college students, like Rose. “We can’t just increase tuition,” says Weyhaupt.

The majority of small private colleges rely primarily on tuition and fees to remain afloat, and those numbers aren’t looking good. A drop-off in births after the 2008 recession, combined with a decline in the percent-age of high school graduates going directly to college after the COVID pandemic, has left a smaller pool of potential students to go around.

“We’re entering a period when fewer students are going to college — there are fewer 18-year-olds — and this was predictable years ago,” says Dick Startz, distinguished professor of economics at the University of California, Santa Barbara, who wrote a paper for the Brookings Institution in October 2024 about the college-enrollment cliff.

“There’s been lots of expansion in colleges, and for a long time the number of students going to college was going up. But that’s leveled off and come down some, and that’s going to be a problem for colleges that are weaker financially.”

The headlines about colleges with record numbers of applications and minuscule acceptance rates apply only to a very small percentage of schools, says Sara Harberson, a former dean of admissions and founder of Application Nation, which helps families navigate the college admission process. “Ivy League universities, elite colleges with large endowments, and nation-ally known institutions dominate the news stories. But most colleges are experiencing the effects of a declining enrollment and a shrinking pool of high school graduates.”

Some of these troubled schools were temporarily bolstered by federal COVID relief funds, but closures have increased as those funds have dried up. “There were few closures during the pandemic because of all the pandemic relief funds, but we’re seeing a few more closures now than before the pandemic,” says Robert Kelchen, professor and head of the department of educational leadership and policy studies at the University of Tennessee, Knoxville. “Enrollment as a whole is down, and operating costs are up.”

Because of the demographic trends, with fewer young people applying to college, it’s going to get even worse, says Robert Massa, vice president emeritus for enrollment at Dickinson College, who spent more than 50 years in the enrollment and business side of college administration.

How to assess a college's financial stability

If you’re looking at college for your child or yourself, it’s important to check out schools’ financial situation as you narrow down your list.

“Most families do not consider a college’s financial stability until after the student has been admitted and is deciding where to enroll,” Harberson says. By then, she says, the student may have become attached to the college, making it difficult to change course.

Even if a struggling college doesn’t shut down, your child’s education could suffer — and you may need to pay for additional semesters — if professors are laid off or departments are eliminated. A financially stressed school also may also cut back on student support programs, such as academic advising and the student health center, and may neglect its buildings’ upkeep.

Here are some steps to take to research a college’s financial situation and questions to ask if you find red flags:

Look at enrollment trends. One of the early warning signs that a college is in trouble is a shrinking freshman class, says Emily Wadhwani, senior director and the sector lead for the higher education team at Fitch, the ratings agency. “That will translate into lower enrollment as that smaller class cycles through, and it can become unmanageable if that persists.”

Tuition and fees account for more than 70% of revenue at most schools, and more than 90% at some, Wadhwani says. “Those schools are extremely vulnerable to changes in enrollment.”

Massa recommends reviewing enrollment numbers in the Common Data Set, an easy-to-read resource most colleges provide for college rankings research. “My advice to parents is to go to a college’s website and type ‘common data set’ in the search bar,” he says. “Go back five to seven years and look at the enrollment section of the report.” Compare the numbers for freshman enrollment, number of applicants and the percentage that were accepted to the most recent figures.

“If you see a big drop-off in applications and an increase in acceptance rate, that will impact applications in the future because the less selective you are, the less students want to go there,” he says. “If there’s a big drop-off in freshman enrollment, that’s a red flag.”

You can also find statistics using the Department of Education’s College Scorecard and the comprehensive but less user-friendly Integrated Postsecondary Education Data System.

Search for news stories about the college’s finances. “Google the college and see what articles come up,” says Massa. “If there are financial issues, it’s going to show up in the press, whether it’s the regional press or the higher-ed press.” You may find reports of faculty layoffs, departments closing, debt problems or attempts by the college to redirect endowment funds.

“For most of the schools that close, it’s not actually a big surprise,” says Startz. “There are often news stories about the school cutting back and having financial difficulties.” He also recommends checking the school’s student-run paper.

Review college finance watch lists. The Scholarship Foundation of St. Louis has been analyzing colleges’ finances since 2019 and keeps a watch list of colleges with special financial concerns. The November 2024 list includes 35 schools.

“We understood the impact of students attending under-resourced schools,” says Faith Sandler, the program’s executive director. “We felt that we owed it to our students to help them broaden the information that they had before making a decision.” Chris Rose is a scholarship recipient and senior fellow with the Scholarship Foundation, and he reviewed its list when deciding where to transfer.

The Department of Education lists schools it has concerns about in its Heightened Cash Monitoring list. The criteria include student-aid compliance issues as well as a college’s finances. If a school you’re interested in is on the list, it’s worthwhile to ask questions. If a school is on probation with its accreditor or on the HCM list, you should ask representatives what led to the situation and what plans they have to improve, Kelchen says.

Look up bond ratings. When a college issues bonds to help fund large capital projects, bond rating agencies assess the college’s financial strength.

“By and large, the colleges that close have been unrated or have had ratings at the low-triple-B or high-double-B level or below,” says Wadhwani of Fitch Ratings. “Our median rating for institutions is in the A category.” At Fitch, you can find ratings by typing in the name of the school.

You can also research colleges at Standard and Poor’s and Moody’s, two of the largest bond rating agencies. At Moody’s, you need to register, but it’s free. For Standard and Poor’s, you’ll also need to sign up for free registration. Once you’ve registered, search for reports on not-for-profit colleges; these reports list ratings for various schools.

Notice the condition of the campus. A Pennsylvania woman whose daughter went to a small liberal arts college in the Northeast says she sensed the college was in trouble when she noticed that its landscaping and overall campus condition were visibly in disrepair (she asked that her name not be used). Then, the bathroom ceiling in her daughter’s dorm caved in. Soon after, the college cut several majors, laid off faculty and sold off campus buildings to reduce its debt. Her daughter transferred to another school.

“Take a look at the housing and academic buildings as you tour the campus,” she recommends.

Ask questions of the college’s business office. If you find any red flags in your research, Massa recommends asking the admissions office whether you can speak to someone in the business office about the school’s financial situation.

“Talk to the finance people and get a candid appraisal,” he says. If the school gives you the runaround, that can be a sign of trouble.

Investigate the stability of the major you’re considering. A much more common problem than colleges closing is schools eliminating departments and majors. That has been an issue at both public and private colleges, says Startz.

“Even if a student wants to pursue something entirely different, their educational journey will be impacted as more students are forced into other majors and programs. This can lead to a longer under-graduate experience — and a more costly one,” says Harberson.

Sandler recommends talking with faculty in the department you’re considering to find out more about the program’s stability and size.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• Best College Majors for a Lucrative Career
• Use the 529 Grandparent Loophole to Maximize College Savings
• Free (or Cheap) College for Seniors and Retirees in All 50 States

As the year wraps up, many of my clients are looking forward to their annual bonuses. Getting a year-end bonus can feel like winning the lottery, creating a natural urge to spend. But if you’ve ever watched National Lampoon’s Christmas Vacation, you’ll remember the scene where Clark Griswold excitedly commits to installing a new pool before his bonus arrives — only to find out it’s a Jelly of the Month Club membership.

As a financial adviser, I always remind my clients at this time of year that bonuses are best seen as part of their annual compensation rather than a one-time windfall. By recognizing and prioritizing long-term financial goals, it’s possible to make smart, intentional decisions about the money — whether that means spending, saving or investing it, or a little of each.

Here’s how I approach the year-end bonus conversation with clients, especially when the temptation is to treat it like “found money.”

Reframe your mindset

When people see a bonus as simply “extra,” they’re more likely to spend it quickly, sometimes on things that don’t move them closer to their financial or personal goals.

Instead, it can be helpful to view bonuses as a form of planned income. For example, a $12,000 bonus becomes an extra $1,000 per month — an amount that’s easier to allocate toward meaningful goals like building an emergency fund or paying down debt. This mindset shift helps keep spending intentional, leading to choices that strengthen financial stability over time.

Take an NFL player, for example — they’re paid per game and have a high income during the season, but without careful planning, they could come up short in the off-season. Year-end bonuses can play a similar role in anyone’s finances. Planning ahead and spreading the income out can prevent the all-too-common “spend it before it’s even hit the account” pitfall.

Consider your priorities

Once we’ve shifted the perspective on a bonus from “extra” to “essential,” it’s time to think about priorities. Consider ways to leverage your bonus to free up monthly cash flow. Paying down high-interest debt, building up your emergency fund or contributing to retirement or college savings accounts are all smart ways to make your bonus work for you and get you even closer to some of your financial goals.

People often ask whether a year-end bonus should be spent on one big priority or split across multiple goals. Usually, the best approach is a bit of both. Dividing the bonus between immediate needs and long-term goals can be especially helpful for couples who may have differing ideas on how to use the funds.

If one partner prefers to pay down debt while the other wants to enjoy a vacation, for example, they could allocate half to the financial goal and half to the experience. This way, the bonus addresses key financial goals and provides something enjoyable in the present — striking a balance that helps meet both practical needs and personal values.

How can you invest in yourself?

Beyond financial priorities, a year-end bonus can also be an opportunity to invest in personal growth. Some clients use their bonuses for professional development, education or even a vacation to recharge. Investing in yourself — whether by building new skills or taking time to reset — can have lasting benefits for both personal satisfaction and long-term financial well-being. Sometimes the best investment we can make is in ourselves.

This could mean funding a course to enhance your career, prioritizing wellness with a new fitness regimen or simply taking time off to refresh and recharge. Your bonus can be the resource that empowers you to improve your health, expand your knowledge or nurture your creativity. Investing in yourself often yields indirect but invaluable returns, like reduced stress, renewed motivation and even unexpected professional opportunities. With a thoughtful approach, a year-end bonus becomes more than just financial — it becomes a tool for self-investment that fuels long-term success.

Pace yourself

Even in a good year, it’s smart to avoid prematurely committing bonus funds to big purchases or locking yourself into financial obligations based on assumptions. Waiting until the bonus is in the bank before making decisions reduces the risk of overspending and allows for a more thoughtful, less rushed approach to planning.

A year-end bonus is a gift that can open doors to financial security, fulfillment and growth. Whether you choose to save, invest, give or enjoy it, the key is to do it with intention. With thoughtful planning, you can turn this year’s bonus into a powerful tool for a more secure and fulfilling future.

Signature Estate & Investment Advisors, LLC (SEIA) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. The information contained herein is for informational purposes only and should not be considered investment advice or a recommendation to buy, hold, or sell any types of securities. Securities offered through Signature Estate Securities, LLC member FINRA/SIPC. Investment advisory services offered through SEIA, 2121 Avenue of the Stars, Suite 1600, Los Angeles, CA 90067, (310) 712-2323.

Related Content

• How Are Bonuses Taxed?
• Wealth Is More Than Just Your Money: How to Manage It All
• Seven Best Places in the U.S. for Wellness Tourism
• Comparison vs Purpose in Financial Planning: Forget the Joneses
• A Healthier Way to Look at Your Financial Future: Measure Backward

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

When a child is born, parents tend to adjust their budgets to account for diapers, baby food and child care — not necessarily for the cost of the child’s college education years down the road. But as the cost of higher education continues to rise, it’s more important than ever to start saving early and often.

Enter 529 college savings plans, which since their creation in 1996 have helped families stash away money for higher education by offering tax-free withdrawals on qualified expenses, including tuition, housing, books and meal plans. Despite the benefits that come with 529 plans, some parents hesitate to save in them: Just 30% of families use a college savings fund such as a 529 plan, according to the Education Data Initiative.

“A lot of people don’t save in 529s because they’re concerned about what happens if their kid doesn’t go to school,” says Michael Hunsberger, a certified financial planner and owner of Next Mission Financial Planning. “But there are options.”

Many of those options come in the form of new rules around how unused 529 funds can be put to work. If you have money in a 529, but your child no longer needs it for education, you may have questions about how to use the funds as well as about the recent rule changes. Here’s what you need to know.

My child graduated from college, but we still have unused funds in her 529 plan. Can we just withdraw that money?

When you withdraw money from a 529 for a qualified educational expense, that distribution isn’t subject to taxes or penalties. But if you withdraw the money for a nonqualified expense, you face both federal income taxes and a 10% penalty on the earnings portion of the distribution. You may pay state income tax, too, depending on where you live.

There are exceptions to the 10% penalty rule, such as if the account beneficiary dies or becomes disabled. If your child receives a tax-free scholarship or grant, or if he or she gets funds through a veterans or employer-provided educational assistance program, you can also qualify for an exemption from the 10% penalty. And the penalty will be waived if the child attends a military academy.

The penalty is also avoidable in certain cases related to the American Opportunity tax credit or Lifetime Learning tax credit. If you used some of your tuition and textbook expenses to qualify for the American Opportunity credit, for example, and therefore couldn’t use those expenses for a qualified distribution from a 529 plan, you can take a nonqualified distribution and avoid the 10% tax penalty on the portion that is attributable to the tuition and textbook expenses used to justify the tax credit.

In all of these cases, you will still pay federal income tax (and possibly state income tax) on the earnings portion of the distribution. So while you can pull unused money out of a 529 account for nonqualified expenses, it’s not optimal, especially if you don’t qualify for one of the exceptions to the 10% penalty.

I have another child starting college soon. Can the money from my older child’s 529 be used for their younger sibling?

Yes. If one child doesn’t attend school or doesn’t need all of the money in his or her account, you can change the beneficiary to your other child (and there are no costs, taxes or penalties for doing so). The transfers aren’t limited to sibling-to-sibling beneficiary switches. If a parent decides to pursue a degree later in life, for instance, they can dip into their child’s unused 529 funds by becoming the beneficiary. You can also change the beneficiary to another eligible family member, such as the beneficiary’s spouse, child, cousin, niece or nephew, without tax consequences.

Another option: The Tax Cuts and Jobs Act of 2017 allows for up to $10,000 per year to go toward tuition in elementary school through high school at public, private or religious schools. But not all the states have adopted the change. Some states, such as New York and Nebraska, still consider K-12 tuition a nonqualified expense, which means residents there will likely have to pay state income tax on distributions.

I’ve heard that my child can put leftover 529 funds toward retirement savings. How does that work?

In 2022, Congress passed the law known as SECURE 2.0 Act, a wide-reaching piece of legislation that revamped much of the country’s retirement system by giving people incentives to set aside more money for their future selves. One of the significant changes SECURE 2.0 brought about is that starting this year, you can roll over funds tax- and penalty-free from a 529 account to a Roth IRA.

Roth IRAs are funded with after-tax dollars and offer tax-free withdrawals once you reach age 59½ and have owned the Roth for at least five years. That differs from the tax treatment for traditional IRAs and traditional employer-sponsored plans, such as 401(k)s. Those accounts are funded with pretax dollars, and you don’t pay taxes on the contributions until you withdraw them. A Roth IRA can give an investment portfolio necessary tax diversification.

“It’s a great opportunity,” Tony Durkan, vice president and head of 529 relationship management at Fidelity Investments, says of the rollover option. “The barrier to entry for the parents was always, ‘What happens if my child doesn’t go to school?’ In this case, those unused dollars can be transferred to a Roth, giving the child a kick-start on their retirement savings.”

The process shouldn’t be too much of a headache. You can start by calling your 529 provider or visiting its website and filling out a rollover form.

Are there limitations I should know about on Roth rollovers?

The owner of the Roth IRA has to be the same as the beneficiary listed on the 529 account. “So I’d want to make sure that the parents didn’t need that money for their own retirement,” Hunsberger says. Yes, the parents would need to pay taxes and penalties if they pulled that money out for themselves, but it could make sense depending on a family’s financial situation.

There are also restrictions on how much you can roll over. You can move $35,000 from the 529 to the Roth IRA over the beneficiary’s lifetime, but you still must adhere to the annual IRA contribution limits: $7,000 in 2024 for those younger than 50, and $8,000 for those 50 or older (for 2025, the limits are the same). That means it could take five years to fully roll over the maximum amount of $35,000. Keep in mind those annual contribution limits aren’t only for 529 rollovers — they include all contributions made to the Roth IRA in a year. You can’t roll over $7,000 from a 529, then contribute extra money from your savings.

The timing matters, too. The new rules outline that the 529 must have been opened at least 15 years before the rollover. (Durkan says the industry is awaiting IRS guidance on whether the clock resets if you switch beneficiaries. “It’s a gray area,” he says.)

You also can’t roll over money contributed within the past five years. Mark Kantrowitz, an expert on 529s and author of How to Appeal for More College Financial Aid, says it’s still uncertain whether that five-year rule applies only to contributions or to earnings as well.

“The thinking is that only the contributions need to be from at least five years ago, and any subsequent earnings on those contributions can be included in a rollover, but there is no official IRS guidance on it,” Kantrowitz says. When the agency does issue guidance, it will likely grandfather in this interpretation of the rule for anyone who already rolled over 529 funds to an IRA, he adds.

As with the rules around using 529 funds for K–12 tuition, not every state has followed in the footsteps of the federal government when it comes to allowing Roth IRA rollovers. Some states haven’t yet passed legislation to ensure that rollovers are tax-free at the state level — and some states may never do so. Be sure to check your state’s rules.

Is there anything else you can do with the unused funds?

It may seem as though putting your money into a 529 is limiting — and you should think through your family’s goals, risk tolerance and time horizon before you invest. But there are lots of options for what you can do with unused funds. Along with the possibilities above, you can also use the funds to lower your student debt. This option came about thanks to the SECURE Act of 2019, which established student loan repayment as a qualifying educational expense.

You can use up to $10,000 of 529 funds per beneficiary for student loan payments. That means that a family could use $10,000 from a 529 to pay down one child’s student loan debts and another $10,000 from the same account to pay down their sibling’s loans. But you can’t use $10,000 from one 529 and $10,000 from another to pay down student debt for one child. Check your state’s laws to see whether the distribution is subject to state income tax.

You can also let the unused funds sit in case your child (or someone else in your family) chooses to pursue a graduate degree, goes to trade school, accepts an apprenticeship or incurs other education-related expenses. Or, because of the allowances for beneficiary changes, it may make sense to leave those funds in the account for your child’s future child. Over time, the money should benefit from market growth. “Nothing stops you from continuing to contribute to the 529 plan after the student graduates,” Kantrowitz says.

Good news for generous grandparents

Before a recent rule change, distributions from a 529 college-savings account owned by anyone other than the student or parent — an aunt, uncle or grandparent, for example — were reported on the Free Application for Federal Student Aid (FAFSA) form as cash support to the student, or untaxed income. The FAFSA is used to determine how much financial aid a student is eligible for, and distributions from grandparent-owned 529s could reduce that aid by 50%. That’s a significant difference: a $5,000 reduction in aid due to a $10,000 distribution, for instance.

For the 2024-25 academic year and beyond, however, distributions from grandparent-owned 529s aren’t considered cash gifts and won’t impact federal student aid eligibility. So while your parents’ money might have affected your child’s financial aid eligibility in the past, it shouldn’t anymore.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related Content

• 529 Plans: Everything You Need to Know About Saving for College
• 529 Plan Contribution Limits for 2024
• Use the 529 Grandparent Loophole to Maximize College Savings

Editor’s note: This is the final article in a six-part series focused on paying for education using smart financial and estate planning. See below for links to the other articles, about direct tuition payments, 529 plans, Coverdell education savings accounts, UTMAs and irrevocable trusts.

Student loans are a common way to fund education, but many may not realize family members can be the source of these loans, not just the federal government or a financial institution. While it is less common, structuring an intrafamily loan may be the best way to help pay for education. This is especially true in periods when the intrafamily interest rates are low.

For it to be considered an intrafamily loan and not a gift, the interest charged must be at least the minimum Applicable Federal Rate (AFR) set by the IRS each month. If the AFR rate is lower than the federal student loan rate, this may be a nice alternative if you want to help a family member while not paying for their education with a gift.

The lending family member can set the terms of the loan, structuring in as much or as little flexibility as desired into the repayment plan. If at any time the lender forgives part or all of the loan, any amount of loan forgiveness converts the loan into a gift, making it subject to federal gift tax laws. The interest earned from the loan is taxable to the lender and is not considered deductible for the borrower.

Unlike formal loan agreements with a financial institution, intrafamily loans can avoid the hassle of a credit check and extensive paperwork, making them more accessible for those with limited credit history or income. Additionally, the loan can be refinanced at any time. The downside, however, is that they may lack legal protections or recourse mechanisms in case of default or disputes. Any breach of trust could strain or, at worst, destroy family relationships.

Benefits of intrafamily loans:

• Intrafamily loans are often issued at lower rates than federal student loans (but must meet IRS-set AFR rate)
• Payment plan can be flexible depending on the terms set by the lending family member
• Avoids the hassle of bank bureaucracy and extensive loan paperwork

Considerations to keep in mind:

• Loan forgiveness converts the loan into a gift, making it subject to federal gift tax laws
• May lead to family disharmony if the loan is not repaid

Exploring intrafamily loans for education funding offers a flexible and possibly lower-cost alternative to traditional student loans. By meeting IRS-set interest rates and customizing repayment terms, you can provide financial support while avoiding the hassle of a bank or federal student loan program. However, keep in mind the risk of tax implications and possible strain on family relationships if the loan is not repaid. Weighing these factors can help you decide if an intrafamily loan is the right choice for your situation.

Conclusion to the series

There are myriad ways to fund a child’s education, and there is no one-size-fits-all solution ― each family should consider their financial situation, tax situation, estate plan, investment plan and/or family/personal dynamics to determine what is best.

Here’s a snapshot of the six options we’ve discussed in this series:

Many families use a combination of methods and vehicles for funding education, especially when multiple generations are involved. For instance, parents may set up a 529 plan to pay for their children’s college education, while the grandparents pay for private secondary education by making tuition payments directly to the school.

As an investment office serving multigenerational families, all with different circumstances, we are happy to help you explore your options for paying to educate future generations.

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part three: Coverdell Education Savings Accounts: A Deep Dive
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part five: How an Irrevocable Trust Could Pay for Education

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Editor’s note: This is the fifth article in a six-part series focused on paying for education using smart financial and estate planning. Other articles focus on direct tuition payments, 529 plans, Coverdell Education Savings Accounts, Uniform Transfer to Minor Accounts (UTMAs) and family loans. See below for links to the other articles.

With the cost of education continuing to rise, it’s never too early to plan ahead and start setting aside funds for the education of your child, grandchild or other family members. Paying for education can be done through strategic financial and estate planning, but it is important to understand your options before deciding what makes the most sense for you.

As you explore smart saving strategies, setting up an irrevocable trust to fund education could be a valuable component of your estate plan. An education trust can be set up for a single beneficiary or multiple beneficiaries (i.e. all of the children, grandchildren, nieces, nephews, cousins, godchildren, etc.). When you set up a trust, the trust document specifies the intent, which can be as broad or narrow as desired. The grantor can decide to cover just tuition or include related expenses such as books, supplies, room and board, travel, etc. Likewise, the grantor can decide the age at which the assets may be used by the beneficiary for education or any other purpose.

The grantor may also include flexible terms to allow for the trust assets to be used for other purposes if the original beneficiary decides not to go to college or needs the money for a different purpose. Once the purpose of the trust is established, the trustee(s) have a fiduciary duty to uphold the terms even after the grantor passes away.

What to know about taxes

Assets placed in a trust are generally protected from creditors and lawsuits, providing a layer of security for the funds. They are also removed from the estate of the grantor, shielding them from estate tax. However, income earned in the trust is subject to income tax, and investment gains are subject to capital gains tax, making a trust less tax efficient than a 529 plan or a Coverdell. Depending on how the trust is drafted, income may be taxed at the trust’s tax rate or the grantor’s tax rate.

Contributions to a trust are subject to federal gift tax laws, although certain provisions can be added so the gifts, or portions of them, can qualify as an annual exclusion gift. If the beneficiary is granted certain withdrawal rights over contributions made to the trust (and specific notices are sent to the beneficiary when contributed), then the contributions will be viewed as a gift in the eyes of the IRS and can be counted toward the annual exclusion amount for the beneficiary in the year of the contribution. Even with such provisions, any amount over the annual exclusion amount will be taxable or count against your lifetime gift and estate tax exemption.

From an investment perspective, there are no restrictions (other than those specified in the trust documents) as to how the trust can be invested. The trustee(s) are responsible for investing the assets in a way that preserves them for the intended purpose, in this case paying for education. Depending on the time horizon, the assets may be invested in a range of asset classes and investment strategies.

As is the case with any trust, setting up and managing a trust can be more costly in terms of time and money. Appointing the proper person, or people, to serve as trustee is very important. This may make a trust seem less appealing for families who do not want the hassle of ongoing administration. (For more information on how to select the right trustee, please refer to our paper Who Do You Trust? Understanding Your Choices When Selecting a Trustee.)

Benefits of a trust to pay for education:

• Funds can be used however the grantor intends (and not just be limited to education)
• Trust assets are removed from the grantor’s estate
• Flexibility for the trust to be used for educational needs or other purposes, depending on trust terms
• Assets in a trust are protected from creditors and lawsuits

What to keep in mind when considering a trust to pay for education:

• Income earned in the trust is subject to taxes annually
• Contributions are subject to federal gift tax laws
• May reduce financial aid (trust is included in FAFSA calculation)
• Requires ongoing administration
• Cost of creating trust and tax preparation fees

Securing funds for education requires thoughtful planning, and an irrevocable trust can be a powerful tool in this strategy. By setting up a trust, you can tailor the terms to fit specific educational needs or broader financial goals, ensuring that the funds are used as intended. While there are tax considerations and administrative responsibilities, the benefits of asset protection and estate planning flexibility make it a compelling option. With careful management and the right strategy, a trust can create a lasting legacy for future generations.

My next article will be about using family loans to help pay for education.

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part three: Coverdell Education Savings Accounts: A Deep Dive
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part six: How Intrafamily Loans Can Bridge the Education Funding Gap

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Editor’s note: This is the fourth article in a six-part series focused on paying for education using smart financial and estate planning. Other articles focus on direct tuition payments, 529 plans, Coverdell Education Savings Accounts, education trusts and family loans. See below for links to the other articles.

If you are thinking ahead about how to pay for a child’s education, you are doing the right thing. With the cost of education continuing to increase for college, graduate school and even private K-12 schools, smart financial planning can help you maximize your investment in education. Today, there are a number of ways to take advantage of tax benefits and other plusses while saving for schooling.

One option worth considering is a custodial account through the Uniform Transfers to Minors Act, or UTMA*. An UTMA is a type of savings account set up for a minor to use however they choose when they reach the age of majority in their state (generally 18 or 21). There are no limitations on the type of expenditures that can be paid for through an UTMA. While it may be used for tuition, room and board, books, etc., it can also be used to pay for a car, a down payment on a house or any other expense of the beneficiary’s choosing.

An UTMA has broad investment options

The custodian of the UTMA typically has a broader range of investment options because they are not limited to investments on a state-sponsored platform or a particular bank platform. The account can be invested in a variety of assets, including individual stocks or bonds, mutual funds, ETFs and other vehicles.

While some families may prefer the flexibility of an UTMA, it does not have the same tax benefits as a 529 plan or Coverdell account, other popular savings vehicles. Earnings on assets inside of the account are taxable at the child’s tax rate up to a certain threshold, at which point the remainder is taxed at the parents’ tax rate. Depending on your or the beneficiary’s tax bracket, this can make an UTMA less appealing.

There are no limitations on contributions to an UTMA, which can come from parents, grandparents, other relatives and friends. It is important to note that similar to Coverdells and 529 plans, contributions to an UTMA are subject to federal gift tax laws.

An UTMA could impact financial aid

Although the adult owner acts as the custodian of an UTMA until the child reaches the age of majority, the funds in the account are considered the child’s assets and must be included on the FAFSA (Free Application for Federal Student Aid), which may reduce the amount of financial aid received.

Unlike a 529 plan and a Coverdell, an UTMA is not portable or transferrable to another child or another type of vehicle. However, given the additional flexibility regarding the unlimited potential uses of UTMA funds, it is unlikely to go unused.

Benefits:

• No limitations on the type of educational expenditures for which it can be used
• Can be used to pay for non-educational expenses if desired
• Investable in a broad range of options (not limited to the sponsoring state or bank)

Considerations:

• Income earned in the UTMA account is subject to taxes annually
• Contributions are subject to federal gift tax laws and limitations
• May reduce financial aid (account is included in FAFSA calculation)
• Not transferrable to another beneficiary and cannot be rolled over
• Minor can withdraw entire balance for any reason upon reaching majority

As tuition costs continue to climb, having a robust savings strategy is essential. An UTMA account provides plenty of flexibility, allowing funds to be used for a wide range of expenses. Although it lacks the tax advantages of some other popular savings options, its versatile investment choices and unlimited contribution potential make it a compelling choice for some families. By evaluating all available options, you can tailor your savings strategy to best support your child’s future goals and financial needs.

My next article will explore paying for education through an education trust.

* Much of what is discussed here also applies to UGMA (Uniform Gift to Minors Act) accounts, but for the purposes of this article, we’re focusing on UTMAs.

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part three: Coverdell Education Savings Accounts: A Deep Dive
• Part five: How an Irrevocable Trust Could Pay for Education
• Part six: How Intrafamily Loans Can Bridge the Education Funding Gap

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

College costs add up quickly. Especially when you consider that average published tuition and fees are $11,950 at public four-year colleges for in-state students, $31,880 for out-of-state students, and $45,000 at private nonprofit four-year colleges. Include room and board, books, and other expenses and the total cost of attendance can hit the wallet hard.

The best 529 plans for 2026 are excellent tools for saving for college, and make smart additions to your estate and retirement planning strategy, too.

If you're looking for ways to save for your child or grandchild’s future college expenses, you might have considered opening one of these tax-advantaged plans.

Tax-free uses for 529 funds have expanded in recent years to include other educational costs, such as tuition for kindergarten through 12th grade and apprenticeship programs. The One Big Beautiful Bill, signed into law July 4, 2025, has further extended the ways you can use 529 money, including a wider range of postsecondary educational programs.

How do you choose the right one?

529 plans allow you, the contributor, to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. 529 plans are gaining traction as a premier education savings tool because, despite being funded with after-tax dollars, all investment growth is tax-free.

However, 529 plans can vary. To select the best one, you’ll need to choose which type of plan makes sense for you by comparing tax breaks, benefits for state residents, fees, contribution options, withdrawal restrictions and investment options.

Choosing the right plan takes research, but it’s worth it. An easy place to start is by checking out these top-ranked 529 plans.

Best direct-sold 529 plans

Direct-sold 529 plans are issued directly from a state financial institution. If you choose one of these plans, you’ll be responsible for managing your own investments within the plan’s online account portal. For this reason, these plans are often cheaper than investor-sold plans.

In its most recent November 2025 report, Morningstar awarded its highest Gold Medalist Rating to the top direct-sold 529 plans, citing their low costs, strong investment options and exceptional stewardship for 2026.

1. Utah's my529: Known for low fees, customizable options and strong oversight.
2. Illinois' Bright Start Direct-Sold College Savings Plan: Offers cost-effective index options, a diverse fund lineup, and high-quality management.
3. Alaska's T. Rowe Price 529 Plan: Formerly known as the T. Rowe Price College Savings Plan, this plan features actively managed portfolios from T. Rowe Price with strong long-term performance potential.
4. Massachusetts' U.Fund College Investing Plan: Managed by Fidelity, with very low-cost index funds and solid age-based options.
5. Pennsylvania's PA 529 Investment Plan: Vanguard-managed with ultra-low fees and excellent passive investment choices.

Best adviser-sold 529 plans

Adviser-sold 529 plans are available through an investment firm. These accounts typically charge a higher fee, but financial advisers manage the plan’s investments for you. Some savers feel these accounts are worth the extra cost because of the access to professional investment advice, actively managed investments and flexible portfolios.

According to Morningstar's latest 529 ratings, released in November 2025, no adviser-sold plans earned the top Gold Medalist Rating. (All five Gold-rated plans are direct-sold due to their exceptionally low costs, strong oversight and investment quality).

Even so, several adviser-sold plans received the next-best Silver rating, making them strong options for those working with a financial adviser.

Top Silver-rated advisor-sold plans highlighted in Morningstar's report include:

1. Ohio's BlackRock CollegeAdvantage 529 Plan: Features a solid lineup with BlackRock funds, good risk management and competitive fees.
2. CollegeAmerica (adviser-sold plan): Managed by Capital Group American Funds, with strong long-term potential. It's the largest 529 plan overall.

Other notable adviser-sold plans may also earn Silver or Bronze ratings, such as the Illinois' Bright Directions program, which was upgraded recently and is quite popular for its low fees.

Check out the full Morningstar 529 ratings report for detailed comparisons:

529 prepaid tuition plans

Another college savings option worth considering is a 529 prepaid tuition plan. This type of plan lets savers prepay tuition at today’s tuition rates at eligible public and private colleges or universities. According to FINRA, "Most states guarantee that the funds you put into a prepaid plan will keep pace with tuition."

Prepaid tuition plans only cover tuition expenses, unlike 529 plans, which cover other qualified expenses, such as room and board, books and supplies. You can fund these accounts with one lump sum or through installment payments. Often, these plans must be used within 10 years, or the interest on initial contributions could be lost.

As of early 2026, there are 18 state-sponsored 529 prepaid tuition plans. However, many are closed to new enrollments, due to ongoing funding challenges.

Only seven state plans are currently open to new applicants, and all require state residency to participate.

Additionally, there is one national institution-sponsored prepaid plan, called Private College 529 Plan, which has no residency requirement, focused on participating private colleges.

• Florida: Stanley G. Tate Florida Prepaid College Plan. Popular, state-guaranteed and flexible for in-state and out-of-state use.
• Massachusetts: U.Plan Prepaid Tuition Program. Covers a percentage of tuition and fees at participating MA schools.
• Michigan: Michigan Education Trust (MET). Contract-based, covers tuition and fees at Michigan public institutions.
• Nevada: Nevada Prepaid Tuition Program. Locks in rates for credit hours earned and usable in-state or out of state.
• Pennsylvania: PA 529 Guaranteed Savings Plan. Credit-based, guaranteed growth tied to the increases in tuition.
• Texas. Texas Tuition Promise Fund. Covers tuition and fees at Texas public colleges, with limited enrollment windows.
• Washington. Guaranteed Education Tuition (GET). Unit-based and state-guaranteed. Recently reopened with favorable pricing.

529 plans can be part of your estate planning

Investing in a 529 plan is a great way for parents or grandparents (via the grandparent loophole) to pass down wealth to the next generation. By helping college students graduate with lower or no student debt, you'll give your kids a leg up when it comes to starting their careers.

For students interested in lower-income careers such as the arts or nonprofit work, graduating without debt might mean the difference between pursuing their dream career or slogging through a high-paying job they dislike to pay off debt.

Another benefit of a 529 college savings plan is its potential to jump-start your child's or grandchild's retirement savings. Thanks to provisions in the SECURE 2.0 Act, families can now roll over funds tax-free and penalty-free into a Roth IRA owned by the plan's beneficiary.

This rollover is subject to a lifetime limit of $35,000 per beneficiary, across all 529 accounts, and must meet these key conditions: The 529 account must have been open for at least 15 years, but contributions and earnings from the past five years are ineligible. The beneficiary must have earned income at least equal to the rollover amount in that year. Annual rollovers are capped at the Roth IRA contribution limit for the year — $7,500 in 2026 for those under age 50. These amounts are reduced by any other IRA contributions the beneficiary makes.

This flexibility reduces the risk of overfunding a 529 plan and provides a powerful way to shift education savings to tax-free retirement growth.

What's not to like about this versatile savings tool? The annual contribution limit is that of the beneficiary, not the parents. Not all states have revised their rules to follow the federal government's expanded uses for 529s, so check your state's policies.

Be sure to read: How This 529 'Superfund' Strategy Can Transform Your Estate Plan

Related Content

• How This 529 'Superfund' Strategy Can Transform Your Estate Plan
• Using a 529 Plan? Here’s What to Keep in Mind
• Three Key Ways You Can Help a Child or Grandchild Pay for College
• Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)

Editor’s note: This is the third article in a six-part series focused on paying for education using smart financial and estate planning. Other articles focus on direct tuition payments, 529 plans, Uniform Transfer to Minor Accounts (UTMAs), education trusts and family loans. See below for links to the other articles.

It’s never too soon to start planning for the education expenses of a child, grandchild or someone you wish to support. With the cost of schooling on the rise — affecting everything from independent day schools to higher education — the need for strategic financial planning is more crucial than ever.

Fortunately, smart financial planning and estate planning can help manage these costs effectively.

If you are planning ahead and weighing your options, you may want to consider opening a Coverdell education savings account. This tax-advantaged savings account, often compared to a 529 plan, offers greater flexibility in setup. Unlike a 529 plan, which is managed by the state where it’s based, a Coverdell can be established through banks, brokerage firms or mutual fund companies. Depending on the financial institution, you may find a greater variety of investment options than with a state-sponsored 529 plan.

Similar to a 529 plan, you contribute after-tax dollars to a Coverdell and invest inside the account, allowing the earnings on your investments to grow tax-free. Assets in a Coverdell are not included in the estate of the person who set it up. Withdrawals for qualified educational expenses (QEEs) are also tax-free. A significant advantage of a Coverdell over a 529 plan is that it can be used for unlimited expenses related to preschool, K-12 education or higher education, including fees, books, technology, certain room and board expenses and even academic tutoring. As is the case with a 529, any amount withdrawn for a non-QEE will be subject to income tax and a 10% penalty tax.

Contributing to a Coverdell

Compared to a 529 plan, there are significant limitations related to Coverdell contributions. The annual contribution per beneficiary is capped at $2,000 a year, regardless of who makes the contribution. Because each student is allowed to be the named beneficiary of multiple accounts, recordkeeping and communication become especially important. For example, if parents and grandparents both contribute $2,000 to different accounts for the same beneficiary in the same year, a penalty may be imposed on the beneficiary.

Additionally, there is an income limitation on those who can contribute to a Coverdell account. To qualify for the maximum contribution of $2,000, your annual modified adjusted gross income cannot exceed $95,000 for single filers or $190,000 for joint filers. This places a natural cap on who is eligible to open a Coverdell, whereas there is no income limit for a 529 plan.

Generally, the treatment of a Coverdell for financial aid is the same as it is for a 529 plan, meaning that if it is owned by the student or parent, it typically would be included as an asset on a student’s FAFSA (Free Application for Federal Student Aid) and thus may reduce the amount of aid given. However, a plan not owned by the parent or student may be treated differently.

Finally, you can contribute to a Coverdell account only for beneficiaries who are under the age of 18. When the beneficiary reaches the age of majority, typically 18 or 21, depending on the state, the beneficiary gains control over the account, and the Coverdell owner no longer has control over how the funds are used.

A Coverdell must be fully withdrawn by the time the beneficiary turns 30, providing a somewhat limited runway for use of the account. This could prove tricky for a student who defers graduate school or wishes to continue their education well into adulthood.

Rolling over a Coverdell account

To mitigate the limitations of a Coverdell, you can consider completing a rollover. One option is to roll over an existing Coverdell account into a different Coverdell account for another qualifying member of the family. For instance, if one child is turning 30, you can roll over the older child’s account into a Coverdell for a younger sibling who is still completing their education.

Alternatively, you may consider rolling a Coverdell into a 529 plan. Distributions from a Coverdell into a 529 plan are considered a qualified expense as long as both accounts have the same beneficiary. This may make sense if the beneficiary is approaching age 30 and is likely to use the funds at a later point in life. This option may also make sense if you are moving into a higher income tax bracket that will preclude you from making further Coverdell contributions, or if you (in conjunction with other family members) wish to contribute more than $2,000 to the beneficiary each year.

Once you have completed the rollover to a 529 plan, you have more flexibility to change the beneficiary to another family member without age limitations.

Benefits of a Coverdell:

• Tax-free asset growth within the account
• Greater flexibility related to qualified education expenses, especially for pre-college education
• May be rolled over into a 529 plan or to another qualifying family member
• Potentially more investment options through the sponsoring bank’s platform

Considerations to keep in mind:

• $2,000 annual contribution limits
• Income limitation for donors ($95,000 for single filers or $190,000 for joint filers)
• The beneficiary gains control of the Coverdell at the age of majority (18 or 21)
• Contributions are subject to federal gift tax laws and limitations
• Contributions will be treated as gifts for federal gift tax purposes (but should not trigger the payment of gift taxes by the donor unless the total that the beneficiary received from the donor including gifts outside of the Coverdell account exceeds $18,000 in the year of contribution)
• May reduce financial aid (student- or parent-owned Coverdells are included in FAFSA calculation)
  

Planning for education expenses requires thoughtful consideration and early action. Evaluating the benefits of a Coverdell alongside your other options can help you discover the most effective savings strategy for your family. With its flexibility to cover a wide range of educational costs and tax-free growth, a Coverdell offers notable advantages despite its contribution limits and income restrictions. Its suitability for pre-college expenses and the possibility of rolling over funds into a 529 plan enhance its appeal. By assessing these factors, you can craft a savings plan that aligns with your goals and secures a strong financial future for your child's education.

My next article will explore the educational savings benefits of Uniform Transfer to Minor Accounts (UTMAs).

Other Articles in This Series

• Part one: Direct Tuition Payments: A Tax-Efficient Way to Pay for School
• Part two: 529 Plans: A Powerful Way to Tackle Rising Education Costs
• Part four: UTMA: A Flexible Alternative for Education Expenses and More
• Part five: How an Irrevocable Trust Could Pay for Education
• Part six: How Intrafamily Loans Can Bridge the Education Funding Gap

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

More families have been taking advantage of 529 plans than ever, with the number of new accounts opened rising each year. And thanks to this surge in popularity, 529s have just hit a new milestone.

Savings in 529 plans across the country have surpassed half a trillion dollars for the first time, according to the College Savings Plans Network (CSPN), a network of the National Association of State Treasurers. Over $508 billion has been invested across 16.8 million open 529 accounts nationally, with the average size of each account increasing from $13,188 in 2009 to $30,295 in 2024.

529 plans are powerful tools that can help you tackle rising education costs. So if you’re looking to save for your child or grandchild’s future college expenses, opening a 529 plan could be the best way to do so, given the plan's favorable tax treatment and the rising cost of a college education.

Mary Morris, Chair of the College Savings Plans Network and CEO of Invest529 says she finds it “encouraging” to see families increasingly recognize “the importance of postsecondary education and that 529 plans exist to help them make that a reality.”

Here’s what you need to know about 529 savings plans and why they’re more popular now than ever.

529 plans and why they’re so popular

529 plans allow a contributor to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. The main benefit? While 529 contributions have to be made with after-federal-tax money, the contributions grow free from federal or state tax.

But there are two additional benefits that 529s have gained fairly recently that make them increasingly attractive savings vehicles.

The first benefit is the ability to roll over unused funds from your 529 plan to a Roth IRA, thanks to changes made to the Internal Revenue Code by the SECURE 2.0 Act. By rolling over unused funds from a 529 account into a Roth IRA, individuals will now be able to avoid income tax and tax penalties that occur when withdrawing funds for non-education expenses. But there are limitations.

The other benefit? It’s what’s referred to as the “grandparent loophole.” The new streamlined FAFSA (which starts with the 2024–25 award year) recently made changes to how distributions are treated, giving grandparents a positive advantage. On the 2024-25 FAFSA, students are no longer required to report cash gifts from a grandparent or contributions from a grandparent-owned 529 savings plan. Because of this, grandparents can now use a 529 plan to fund a grandchild’s education without impacting their grandchild's financial aid eligibility.

Bottom line

The main reason to invest in a 529 plan is because of its advantageous tax deferral and growth strategies. But additional benefits, like the ability to superfund a 529 (avoid paying gift taxes on large, one-time contributions to a 529 plan through 5-year gift tax averaging), tax-free rollovers to Roth IRAs and contributions from grandparents no longer counting against financial aid eligibility, have made 529 plans even more appealing in recent years.

Related Content

• Three Reasons You Need to Use a 529 Plan (and Two Reasons You Don't)
• You Should Be Investing in a 529 Now for Your Kids' or Grandkids' Tuition
• Highest Paying College Majors (and 10 Lowest)
• Keep Track of 529 Plan Spending with Credit Cards for Kids and Teens