Insight

A new year’s guide to smarter college savings

A new year’s guide to smarter college savings
Key takeaways
Start strong with early contributions
1

The earlier you start, the more your savings can potentially benefit from compounding.

Leverage increased gift tax exclusions
2

The IRS now allows individuals to contribute up to $19,000 per recipient annually ($38,000 for married couples) without incurring gift tax.

Revisit goals with updated tuition costs
3

Plan your contributions with an eye on rising college expenses and inflation trends.

A new year’s guide to smarter college savings

As we step into the new year, it’s the perfect time to reassess financial goals and take proactive steps toward building a secure future for our younger loved ones. For parents and other family members, investing in a child’s education is a long-term commitment that can help provide a lifetime of rewards. A 529 plan offers a tax-advantaged pathway to make those dreams a reality. Here are some strategies to help maximize the growth of your 529 plan in 2025.

Beginning-of-year checklist

Kick off 2025 on the right foot by tackling these key steps:

  • Set a contribution schedule: Decide on monthly, quarterly, or lump-sum contributions to keep your savings on track.
  • Engage family and friends: Share your child’s CollegeBound 529 plan information and encourage gift contributions for birthdays or holidays.
  • Review your investment allocations: Collaborate with a financial professional to ensure your CollegeBound 529 plan’s investments align with your timeline and objectives.
  • Update your financial goals: Factor in the new tuition rates and gift tax exclusions to refine your savings plan.

Contribute early and regularly

The power of compounding has the potential to significantly amplify your savings over time. Regular contributions to a CollegeBound 529 plan is one of the most effective ways to help you build a strong foundation for your child’s future. Automating contributions simplifies the process, ensuring consistency without requiring constant oversight. For example, a $200 monthly contribution can grow to more than $41,400 over 18 years1.

Employers are increasingly offering direct deposit options for 529 plans, which can make it even easier to save. Dollar-cost averaging—a strategy of contributing the same amount regularly—can also help smooth out market fluctuations over time.

Learn more about automatic 529 plan contributions.

Leverage increased gift tax exclusions

Starting in 2025, individuals can contribute up to $19,000 annually per recipient without triggering gift taxes, or $38,000 for married couples. This represents a $1,000 and $2,000 (respectively) increase from 2024 levels, providing an even greater opportunity for grandparents, aunts, uncles, and other loved ones to tax-efficiently contribute to your child’s 529 plan. Many 529 plans offer tools like Ugift to simplify third-party contributions, allowing friends and family to give the gift of education with just a few clicks.

Additionally, the five-year election, also known as "superfunding," has increased to $95,000 per individual in 2025, up from $90,000 in 2024. Married couples can contribute up to $190,000 per recipient using this strategy, allowing them to front-load a 529 plan with five years of contributions in a single year without incurring gift tax. For those who superfunded in recent years, it’s worth exploring the option to true-up those contributions to reflect the higher 2025 exclusion amount.

Before superfunding, it’s important to consult with a financial professional, especially if you’ve made other gifts during the year or are willing to have your contributions applied against your lifetime gift and estate tax exemption (set at $13.99 million per individual, or $27.98 million per married couple, for 2025). Also, don’t forget that in some states, contributors may also qualify for state income tax deductions or credits, adding further incentives for loved ones to contribute.

Review and update goals

It’s important to revisit your financial goals annually and adjust your savings strategy to account for rising education costs. In the 2024–2025 academic year, the average tuition and fees for a four-year public in-state college increased to $11,610, up by $300 from the prior year. For private nonprofit colleges, tuition rose to $43,350, an increase of $1,6102. Being mindful of the type of institution your child might attend will help you plan appropriately.

Final thoughts

Saving for a child’s education is a long-term commitment, but it doesn’t have to be overwhelming. By contributing regularly, encouraging family participation, and staying informed about rising costs, you can build a robust CollegeBound 529 plan that helps secure your child’s educational future. And remember, a financial advisor can provide personalized guidance to ensure your strategy aligns with your unique goals.

Start 2025 strong and stay the course—your efforts today will pave the way for your young loved one’s success.

Footnotes

Related insights