Can I Pay for My Grandchild’s College Tuition?

Yes, you can pay for your grandchild’s college tuition, and federal tax law gives you more than one way to do it without owing gift tax. The most powerful route is to pay the school directly: under Internal Revenue Code Section 2503(e), tuition paid straight to a qualifying institution is exempt from gift tax with no dollar limit at all.¹ Other tools, like 529 plans and annual cash gifts, come with thresholds but still let you move meaningful sums toward education. Which method fits depends on how much you want to give, how old the grandchild is, and whether financial aid is in the picture.

Paying Tuition Directly to the School

The direct-payment exclusion is the cleanest option. Any amount you pay directly to a qualifying school for a grandchild’s tuition is exempt from gift tax. It does not count toward your annual gift exclusion and does not reduce your lifetime exemption.¹ There is no cap, which makes it especially useful for expensive programs.

To qualify, the school must have a regular faculty and curriculum with students normally in attendance where classes are held. Most accredited colleges and universities meet the standard, and qualifying foreign institutions count too, so a grandchild studying abroad at an eligible university can still benefit.²

The exclusion covers tuition only. Room, board, books, supplies, and fees are not eligible; a check written to your grandchild for those costs is a regular gift subject to the annual exclusion rules. And the payment must go directly to the institution. A check made out to the school, or an electronic transfer to the billing office, satisfies the rule. Handing the money to the student first breaks it.¹

Using a 529 College Savings Plan

A 529 plan is a state-sponsored investment account for education expenses. You open the account, name your grandchild as beneficiary, and contributions grow tax-free as long as withdrawals cover qualifying costs. The list of eligible expenses is broader than the direct-tuition exclusion: tuition, fees, books, supplies, equipment required for enrollment, and reasonable room and board for students enrolled at least half-time.³

You can also use up to $10,000 per year from a 529 to pay tuition at an elementary or secondary school, whether public, private, or religious.⁴ If money is withdrawn for a non-qualifying purpose, the earnings portion is subject to income tax plus a 10 percent penalty.³

Superfunding a 529 Plan

You can front-load contributions by using five years of the annual gift tax exclusion in a single year. For 2026, the annual exclusion is $19,000, so one grandparent can put up to $95,000 into a 529 at once. A married couple can combine exclusions and contribute up to $190,000 for a single grandchild in one year.⁴ You make the election on IRS Form 709 and treat the gift as spread across five years. During that stretch, any additional gifts to the same grandchild will exceed the annual exclusion and start eating into your lifetime exemption.

Superfunding works best when a grandchild is young, because the whole lump sum has more years to grow tax-free.

Rolling Unused 529 Funds Into a Roth IRA

Starting in 2024, unused 529 funds can be rolled into a Roth IRA in the beneficiary’s name under a SECURE 2.0 Act provision. That gives you a way to convert leftover money into retirement savings for your grandchild instead of taking a taxable withdrawal. The rules are specific:⁵

The 529 plan must have been open for more than 15 years.
Only contributions (and their earnings) made more than five years before the rollover are eligible.
The rollover cannot exceed the Roth IRA annual contribution limit, which is $7,500 for 2026.
Total rollovers across the beneficiary’s lifetime cannot exceed $35,000.
The money must move through a direct trustee-to-trustee transfer.

Because of the 15-year requirement, a 529 opened at birth becomes eligible for Roth rollovers around the time the grandchild turns 15, which helps if the child later receives a scholarship or picks a cheaper school.

Cash Gifts and the Annual Exclusion

For anything the direct-tuition exclusion does not cover — housing, books, transportation, living expenses — you can give cash directly to your grandchild under the standard federal gift tax rules. For 2026, you can give up to $19,000 per recipient per year without filing a gift tax return. A married couple can give up to $38,000 per grandchild per year by combining exclusions.⁶

If your total gifts to one grandchild in a year exceed $19,000, you must file IRS Form 709. Filing does not necessarily mean you owe tax; it tracks how much of your lifetime exemption you have used. For 2026, that lifetime exemption is $15 million per individual, so most grandparents will never come close to owing gift tax.⁷

The direct-tuition exclusion works alongside the annual exclusion, not instead of it. You could pay $50,000 in tuition directly to the university and still give your grandchild $19,000 in cash the same year with no gift tax consequences.¹

The Generation-Skipping Transfer Tax

Because a grandchild is two generations below you, large gifts can trigger a separate federal levy called the generation-skipping transfer (GST) tax. The rate is a flat 40 percent on transfers above the exemption. For 2026, the GST exemption is $15 million per individual, the same as the lifetime gift and estate tax exemption.⁷

Transfers that qualify for the direct-tuition exclusion under Section 2503(e) are not subject to GST tax, because they are not treated as taxable gifts. Annual exclusion gifts within the $19,000 limit also generally do not require GST exemption allocation. For larger transfers such as a superfunded 529, you allocate GST exemption on Form 709 to shield those gifts.

Effect on Financial Aid

How you help pay for school can affect the aid package on the Free Application for Federal Student Aid (FAFSA). Under the simplified FAFSA rules that took effect for the 2024–2025 academic year, distributions from a grandparent-owned 529 no longer have to be reported. The form focuses on the student’s and parents’ income and assets, so grandparent-owned 529 withdrawals do not reduce eligibility for federal grants or loans.⁸

Private colleges that use the CSS Profile for their own institutional aid may still ask about grandparent-owned 529 accounts, and some of them treat outside financial support as a resource that reduces demonstrated need.⁸ If your grandchild is applying to private schools, check whether they use the CSS Profile and how they evaluate third-party contributions before you decide how to structure your help.

Keeping Records

Good documentation protects you if the IRS questions whether a payment qualifies for the tuition exclusion. The Form 709 instructions say that payments qualifying for the educational exclusion should not be listed on Schedule A, but you still need records showing the payment went directly to a qualifying school and covered tuition only.⁹ Keep billing statements, canceled checks or electronic transfer confirmations, and receipts from the institution.

For 529 contributions, keep records of each deposit and any Form 709 filings for years you used the superfunding election. If you eventually roll unused 529 funds into a Roth IRA, you will need to show the account has been open more than 15 years and that the rolled-over contributions were made at least five years earlier. For any gift that affects your lifetime exemption calculation, hold onto the records indefinitely.

1
Office of the Law Revision Counsel. 26 USC 2503 – Taxable Gifts
2
eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
3
Office of the Law Revision Counsel. 26 USC 529 – Qualified Tuition Programs
4
Internal Revenue Service. 529 Plans: Questions and Answers
5
Internal Revenue Service. Publication 590-A – Contributions to Individual Retirement Arrangements (IRAs)
6
Internal Revenue Service. Frequently Asked Questions on Gift Taxes
7
Internal Revenue Service. What’s New – Estate and Gift Tax
8
Vanguard. Understanding the 529 Plan Grandparent Loophole
9
Internal Revenue Service. Instructions for Form 709