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.
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Meanwhile, an estimated 425 million people today owe federal student loan debt, according to the Education Data Initiative, which also says the average public university student borrows $31,960 to get a bachelor’s degree.
Owing all of that money can take a toll. 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.
If you’re in a strong enough financial position to help pay for your grandchildren’s education, you may be eager to ease that burden — both for them and your grown children who may also be struggling to set aside money for college savings. And if so, a 592 plan is a good place to start. These plans offer the benefit of tax-free gains and withdrawals, provided the money is used to cover qualifying educational expenses.
You may be wondering whether it’s better to make a large lump-sum contribution to a 529 plan now or spread those funds out evenly over the years. And the truth is, you could go either way. So it’s important to understand the pros and cons of both options.
The case for mega-funding a 529 up front
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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
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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 does increase your market timing risk compared to dollar-cost averaging year after year.
Schmehil also points out that it’s important to consider the tax benefits your state may 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 may end up in a situation where your healthcare costs increase dramatically later on in retirement. Or, one of your grandchildren may decide once they reach middle school that 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 of 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.
And 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.”
