But Really, How Can I Afford My Kid’s College?

---

Evan Serwinski, CFP^®
Associate Wealth Advisor, Downers Grove

---

There is nothing more satisfying than parenthood. Any mom or dad will tell you it can be hard to keep the rose-colored glasses on, but a single hug can erase a thousand nights of poor sleep.

The natural anxiety of being a parent never really goes away. It starts with grasping how to keep your new little one alive, then takes off running with an endless list of concerns as wide-ranging as life itself.

One of those main concerns is our children’s education. We want them to be able to communicate and navigate the world so we can relax a little. Reading books and singing songs is the fun part, but eventually they jump into full days of school and extracurricular activities, and we suddenly realize they are on the path to becoming adults.

Planning for that future is a necessity. With two young children, I can relate to the fear of the unknown. I’m part of a generation of millennials that was told even our liberal arts degrees would secure us jobs that could support a family. But today, higher education has become more purposeful than what was thought to be decades ago, which adds to the pressure of making the right decisions now. As a parent, you’ll never be able to control what your children are going to do—but thoughtful planning and saving strategies can offer them flexibility and help them over time.

Let’s begin by first understanding how expensive college tuition has become. In 2024–25, the average annual total costs (i.e., for tuition and fees; room and board; and allowances for books and supplies, transportation, and other personal expenses) for full-time undergraduate students were:¹

• $20,570 for two-year students at public schools
• $29,910 for four-year students at in-state public schools
• $49,080 for four-year students at out-of-state public schools
• $62,990 for four-year students at private nonprofit schools

For planning purposes, a financial advisor might inflate these costs to help with the long-term planning. You can imagine how ugly that looks on a ten- or fifteen-year timeline. It’s daunting for any parent, but the good news is that you have options.

529 Plans

The standard investment option that most parents have heard of is the 529 college savings plan. This type of account offers tax-deferred investment growth and tax-free distributions when used for qualified education expenses. Basically, money grows without capital gains taxes and won’t be taxed at withdrawal, like a Roth IRA. For college tuition and fees, along with room and board, there are no limits on dollar amounts withdrawn.

Beginning in 2026, these plans also permit up to $20,000 per beneficiary per year for qualified K–12 education expenses, including both tuition and an expanded set of non-tuition costs such as books, curriculum materials, testing fees, tutoring, and other approved educational services.²

The One Big Beautiful Bill Act recently expanded the range of schooling that qualifies as an educational expense to include trade schools, apprenticeships and continuing-education programs. That factor helps ease the mind of parents of children who might not have the traditional college experience in mind.

One feature of a 529 that I find useful is the high annual contribution limit which corresponds to $19,000 per parent per year ($38,000 per a married couple), In addition, grandparents can each contribute another $19,000 per beneficiary. There’s also an option to do a five-year front load at $95,000 to maximize the power of compounding.³

Gifts and Direct Payments

If your children’s grandparents are passionate about a college education, consider talking to them. It can be uncomfortable to start the conversation for both parties, but as we get older, we should collaborate more with our parents when discussing our own children’s futures. In talking with my clients, many of them have told me they would rather see the money they gift being used during their own lifetimes, for specific benefits such as education and necessities, than leave a larger amount behind after they pass.

Grandparents can make direct payments toward tuition or make a gift to a grandchild below the annual exclusion limit without any tax consequence. Additionally, some states will offer tax benefits for contributions to 529 plans.

Usually, the awkward conversation proves worthwhile. Open dialogue about finances not only helps with today’s concerns but can also make future discussions simpler.

UGMA and UTMA Accounts

In addition to the popular 529 account, there are other ways to save for education and maintain financial flexibility. Custodial accounts operating under Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA) rules allow parents to have control until their children have reached the age of majority, which is either 18 or 21, depending on the state.

Capital gains, dividends, and interest are reported under the minor’s social security number, which in 2026 protects the first $1,350 from taxation under the kiddie tax rules. The next $1,350 is taxed at the child’s marginal rate, likely 10%, and every dollar beyond is taxed at the parent’s rate.

The catch here is that once a child hits the age of majority, the money is theirs alone. That factor scares off a lot of parents, but I often recommend these accounts as an auxiliary savings tool. You can introduce the concept of investing to them with the concrete benefit of access to funds at a time when they may be asking you for cash regularly.

Trump Accounts

In July 2026, the Trump Accounts initiative will launch and offer parents a more tax-efficient alternative to the standard UGMA/UTMA custodial account. These accounts will be tax-deferred until the minor reaches 18 years old.

However, it is worth noting that withdrawals from the Trump Account, unlike the custodial account, will be taxed at your child’s marginal rate. Essentially, the withdrawal rules for a Traditional IRA apply, making this more of a retirement tool than the standard custodial account. Exceptions include education or first time homebuying, where withdrawals are allowed without penalty but still incur earned income tax.

For children born in the calendar years 2025 through 2028 an initial $1,000 of federal funds will be provided at the time the account is opened. Additional annual contributions are capped at $5,000 per year.

Only low-cost, indexed mutual funds and ETFs are allowable investment holdings in this account type. While limiting flexibility, this follows along with the principle that these are built to be invested prudently.

One positive in regard to Trump Accounts is that they circumvent the earned income requirement of the Roth IRA, which means you can start contributions immediately. Much like UGMA/UTMA custodial accounts, I see these as a compliment to a broader personal financial strategy.

Roth IRAs

While it’s a great tool to build wealth for the long-term, a Roth IRA is last on the list for education funding. As mentioned, the Roth’s requirement to have earned income greater than the amount of your annual contribution is the sticking point. Investment growth and withdrawals for eligible education expenses are tax-free, but the small window for funding before college, even if your child’s employment starts at age 14 or 15, makes it less practical.

If you save enough to believe your 529 accounts are fully funded for the higher education of your child’s choice, the Roth IRA could be an overflow option. Keep in mind that you can also contribute excess funds from a 529 account to a Roth IRA at the annual contribution limit of $7,000 per year for up to five years for a total of $35,000. This rollover can be done if the account has been open for 15 years and the funds have been in the account for 5 years.

Now unfortunately, none of these options will do the college funding for you—that’s one of the glorious responsibilities of being a parent. While you may want your children to learn the value of a dollar through part-time employment, or by having them pursue scholarships and student loans, the days of minimum wage jobs affording you a college education disappeared last century, and alternative savings strategies are likely needed.

With the help of a financial planning professional such as myself, and many other advisors here at Hightower Signature Wealth, you can make the savings process easier and more approachable. Every parent experiences the complex emotions of providing for their children as they grow into adulthood. Why not find a partner that can help?

---

Sources:

1 Zinn, D. (2025, July 28). Average cost of college 2024-2025. Bankrate. https://www.bankrate.com/loans/student-loans/average-cost-ofcollege/#cost

2 Mdisipio. (2025, November 10). 529 plans and the OBBBA: What you need to know | BlackRock. BlackRock. https://www.blackrock.com/ us/financial-professionals/insights/529-plans-and-the-obbba-what-you-need-to-know

3 An accelerated transfer to a 529 plan (for a given beneficiary) of $95,000 (or $190,000 combined for spouses who gift split) will not result in federal transfer tax or use of any portion of the applicable federal transfer tax exemption and/or credit amounts if no further annual exclusion gifts and/or generation-skipping transfers to the same beneficiary are made over the five-year period and if the transfer is reported as a series of five equal annual transfers on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. If the donor dies within the five-year period, a portion of the transferred amount will be included in the donor’s estate for estate tax purposes. Source: https://www.fidelity.com/learning-center/smart-money/529-contribution-limits