Grandparents are using 529 plans to help grandkids pay for college — and one rule change made it easier

💡 Grandparents are utilizing 529 plans to assist their grandchildren with college expenses, thanks to a recent rule change.

The Federal Reserve delivered a hawkish surprise on Wednesday, signaling that interest rate cuts remain further away than markets had hoped. Fed Chair Jerome Powell told reporters that the central bank needs "greater confidence" that inflation is sustainably declining before it will consider easing policy.

The 10-year Treasury yield surged to 4.8% in the aftermath, its highest level since October 2023. $TLT fell sharply as bond traders repriced the timing of the first cut from March to June.

College Savings Strategies

Grandparents are increasingly turning to 529 plans to help their grandchildren pay for college, and a recent rule change has made it easier for them to do so. Tax benefits are a major draw for these plans, which allow parents or grandparents to save up to $16,000 per year per beneficiary without incurring federal income taxes.

Investment Options

529 plans offer a range of investment options, including stocks, bonds, and mutual funds. Grandparents can invest in a mix of these options to create a diversified portfolio that meets their needs. Vanguard, a leading provider of index funds, is a popular choice among 529 plan investors.

Increased Flexibility

The recent rule change has increased flexibility for grandparents who want to use 529 plans to help their grandchildren pay for college. They can now use these plans to pay for tuition, fees, and even room and board.

What It Means for Investors