The Questions That Shape the Plan
College planning is often treated primarily as a savings problem. Families begin by asking which account to open, how much to contribute, or whether they are already behind.
Those questions matter, but in my experience, they are not the best place to begin.
I start with these two questions.
What role do we want to play in paying for our children’s education?
How much of the cost do we want, or realistically expect, to cover?
These questions move the conversation beyond simply accumulating money. They help define the family’s values, expectations, and responsibilities before determining which financial strategies may make the most sense.
For one family, that might mean:
- Covering the full cost of tuition, fees, housing, and other education expenses.
- Contributing a set amount while asking the student to cover the remaining balance.
- Evaluating scholarships, student employment, available savings, and borrowing options to responsibly address any remaining gap.
- Continuing to cover certain expenses such as auto insurance, a cell phone, or a car payment while the student is in school.
- Combining several approaches based on the family’s resources, priorities, and expectations.
There is no single right answer. The strongest plans begin with clarity about what the family wants to provide and what level of financial responsibility they want the student to assume.
Support Begins with Your Own Stability
One of the first things I ask parents is whether their own retirement strategy is on track.
I often use the airplane analogy. During the preflight safety instructions, passengers are told to put on their own oxygen masks before assisting someone else. The same principle applies to college planning. If your own financial plan is not healthy, helping with college may ultimately create a financial burden for both you and your children. Students may have access to scholarships or loans for school, but there are no comparable financing options for retirement.
This reality can be emotionally difficult, especially when you want to give your children every opportunity.
Still, one of the greatest gifts you can offer your children is your own long-term financial stability.
More Than One Way to Help
A family does not need a fully funded college account to provide meaningful help. Support can take many forms, and it can come at different stages.
Some parents continue covering health insurance or living expenses. Others contribute from future cash flow or help the student evaluate scholarships, employment, savings, and responsible borrowing options. Grandparents may also provide early seed money when they have the capacity to give.
This is why I encourage families to think broadly from the start. College planning does not depend on a single account or a single moment in time.
Your capacity will likely change as your income grows and your expenses evolve, and the strongest strategies often pair savings today with additional support later.
Choosing the Right Planning Tools
Families can use several types of accounts when planning for a child’s future. A 529 plan is designed for qualified education expenses and may offer federal and state tax advantages. A custodial account, such as a UTMA, generally offers broader flexibility, but the assets become the child’s property at the applicable age of majority and may affect financial-aid calculations.
The right approach depends on the family’s goals, timeline, desired flexibility, tax considerations, and expectations for the child. In many cases, a thoughtful combination of accounts may be more appropriate than relying on a single option.
From a federal tax standpoint, 529 plan earnings can grow tax-deferred, and withdrawals are generally federally tax-free when used for qualified education expenses.
Beginning in 2026, up to $20,000 per beneficiary annually may be used for federally qualified K–12 expenses, including tuition and certain curriculum, instructional materials, tutoring, testing, dual-enrollment fees, and educational therapies. State tax treatment may differ from federal treatment.
For example, Nebraska is not scheduled to recognize K–12 withdrawals as Nebraska-qualified expenses until January 1, 2029. Nebraska taxpayers should consult their tax advisor before taking a K–12 distribution. Eligible Nebraska taxpayers may also qualify for a state income-tax deduction of up to $10,000 annually for contributions to a NEST 529 account.
For many families, it is a relief to realize that these funds are not as restrictive as they may have assumed and can support a wider range of education expenses.
SECURE 2.0 also created a limited opportunity to move unused 529 funds through a direct, tax-free rollover to the beneficiary’s Roth IRA. These rollovers are not subject to the normal Roth IRA income limits, but several restrictions apply.¹
Families who want to move a larger amount into a 529 at once have an additional option. A 529 account owner may elect to treat a single contribution as if it were made evenly over five years for federal gift-tax purposes. Based on the 2026 annual gift-tax exclusion of $19,000, an individual may contribute up to $95,000 at one time under this election, and a married couple may contribute up to $190,000, subject to the five-year election and Form 709 reporting requirements.
In my experience, the answer is rarely one perfect account. The goal is to create an appropriate mix of education funding, flexibility, and long-term opportunity for children and grandchildren.
Grandparent-Owned 529 Plans
Grandparent-owned 529 plans deserve special consideration because current federal financial-aid rules may provide favorable treatment.
- Assets: A grandparent-owned 529 plan is not reported as a student or parent asset on the FAFSA. A parent-owned 529, by comparison, is generally reported as a parent asset.
- Distributions: Qualified distributions from a grandparent-owned 529 are not reported as untaxed student income on the FAFSA.
Under current FAFSA rules, neither the grandparent-owned asset nor its qualified distributions affect the federal student-aid calculation. Colleges using the CSS Profile or their own institutional-aid methodology may request additional information and treat these accounts differently.
This may allow grandparents to help fund education while preserving flexibility. Because state tax rules vary, families should review the applicable rules with their tax and financial professionals.
Creating Room for Responsibility
The financial decision is only part of the conversation. As students compare schools, families should discuss whether the added cost of one option meaningfully aligns with the student’s goals.
Suppose an in-state public school costs $15,000 per year while a private school costs $50,000. If the primary reason for choosing the private school is that it has a prettier campus, the family should be willing to ask:
“Is that difference worth an additional $35,000 each year?”
The answer may still be yes if the more expensive school offers a meaningfully stronger academic program, professional network, or record of job placement. If so, the family and student can work together to close the gap through scholarships, employment, savings, or other resources.
Establishing clear expectations creates more than financial accountability. It creates ownership. Whether that means maintaining grades, working during the summer, applying for scholarships, or contributing toward expenses, the goal is not simply to pay for college. It is to help your child become someone who is prepared for life after it.
Ultimately, college planning is not simply about deciding how much money to save. It is about deciding the role you want your family to play. Once that decision is clear, the financial strategy becomes more focused and intentional.
If you have questions about coordinating college funding with your broader financial plan, Stevens Capital Partners can help you evaluate an approach that reflects your family’s goals.
¹ The 529 account must generally have been open for at least 15 years. Contributions made within the preceding five years, and earnings attributable to those contributions, are not eligible. Rollovers are also subject to the annual Roth IRA contribution limit, the beneficiary’s earned income, and a $35,000 lifetime limit.
