College costs are rising faster than almost any other household expense — the average annual cost now tops $38,000 per student. At the same time, proposed legislation in 2025 could expand the flexibility of 529 college savings plans, broadening how families use them.

For people balancing education savings with retirement, taxes, and estate goals, the real question isn’t how much to save — it’s how to structure savings so they strengthen your full financial picture. That’s where 529s — and the guidance of a financial advisor — come in.

This guide covers:

• How 529 plans create tax-efficient ways to save for education in 2025

• The challenges families face when paying for college today

• Your questions answered, "What if my child doesn’t go to college?" and, "How can a financial advisor help me with 529 planning?"

Let's dive in.

How 529 Plans Work for Families Today

A 529 plan is a tax-advantaged investment account designed for education. Contributions grow tax-free, and withdrawals for qualified expenses — tuition, fees, room and board — are not taxed.

What makes 529s powerful in 2025:

• Expanded uses: Funds can cover K–12 tuition, apprenticeships, and student loan repayment.

• Flexibility: You can change beneficiaries, even to yourself if you pursue further education.

• Estate benefits: “Superfunding” rules let you contribute up to five years of annual gift tax exclusions at once, shifting wealth efficiently while retaining control.

The Realities of Paying for Education in Today’s Economy

The cost of higher education has increased more than 160% since 1980. Even for households with strong savings, the challenge is ensuring contributions are structured tax-efficiently and coordinated with other financial goals.

Without guidance, families often miss state-specific tax deductions or overcommit funds to education when a blended strategy could work better.

Scenario: A couple with two children contributes heavily to a 529 plan but doesn’t realize their state only allows deductions up to a certain limit. They miss out on maximizing benefits — and tie up funds they could have invested elsewhere. An advisor helps them rebalance by contributing up to the deductible limit, then investing excess savings in a taxable account for more flexibility.

This is similar to how refinancing can break down for those with multiple income sources — a situation where professional advice often makes the difference.

What’s New in 2025

In August 2025, new federal proposals were introduced that could further enhance 529 plans . While still under consideration, highlights include:

• Expanding eligible expenses (such as professional certifications and certain living costs)

• Raising contribution limits

• Supporting lifelong learning opportunities beyond traditional college

These proposals are not yet law, but the direction is clear: policymakers continue to make 529s more versatile. Advisors help families track these changes and adjust strategies accordingly.

Frequently Asked Questions About 529 Plans

What if my child doesn’t go to college? You can change the beneficiary to another family member or, under recent rules, roll unused funds into a Roth IRA if conditions are met.

Are 529 contributions deductible on federal taxes? No. However, many states offer deductions or credits. Rules vary, so checking your state program is essential.

What happens if I withdraw funds for non-qualified expenses? Earnings are taxed as ordinary income and may face a 10% penalty. Your contributions can be withdrawn without penalty.

Can I use a 529 for private school? Yes. You can withdraw up to $10,000 annually per student for K–12 tuition.

How can a financial advisor help me with 529 planning? Advisors can:

• Integrate 529s with estate planning by using superfunding to reduce taxable estates while funding education.

• Balance liquidity and tax benefits by pairing 529s with taxable investment accounts.

• Coordinate multigenerational strategies when grandparents want to contribute.

• Monitor policy changes and adjust your contributions or withdrawals accordingly.

Scenario: A grandparent wants to help three grandchildren equally, but worries about fairness and control. An advisor shows them how to fund separate 529s under annual gift exclusions while retaining the ability to change beneficiaries if one child receives a scholarship. This keeps the plan flexible while meeting legacy goals.

For more on timing and advisor value, see When Is the Right Time for a Financial Advisor.

The Aligned Perspective: 529 Plans

Funding education is about more than paying tuition bills — it’s about coordinating education savings with retirement, taxes, and estate planning. The most effective 529 strategies aren’t built in isolation. They’re part of a bigger picture, tailored to your goals and your family’s future.

At Datalign, we connect families with fiduciary advisors who understand these complexities and can design strategies that make education savings work in harmony with other priorities. If you’re approaching education funding, retirement, or one of the seven life events that require more than standard financial advice, the right advisor can help you prepare with clarity and confidence.