Back to School College Saving Strategies for 2025

NATIONWIDE - SEPTEMBER 2025 - (USAnews.com) — As the school year begins and backpacks fill with books, parents across the country are thinking about their children's futures—and for many, that means preparing for the rising costs of college. But in 2025, new federal rules and flexible savings options have made it easier for families to adjust their strategies and ensure they’re ready for whatever path their children choose. Let’s dive into real-life examples, like the Martinez family’s story, and explore how these strategies can work for you.

A Real-Life Scenario: The Martinez Family

Meet the Martinez family from Texas. Janelle and Ryan opened a 529 plan when their daughter, Ava, was just starting preschool. They committed to automating $200 each month, celebrating milestones like Ava’s first spelling bee, her transition to private school, and eventually her college acceptance They also began a non-qualified savings strategy automatically saving an equal amount monthly into a couple of carefully selected  mutual funds appropriate for the time frame and their risk tolerance that are subject to capital gain and loss taxation.  Over the years, their 529 plan grew along with their non-qualifed account, giving them confidence that they were on track to pay for Ava’s college tuition. 

However, Ava’s plans evolved. Instead of attending a traditional college, she chose to pursue a career in digital media through an online certification program. At first, Janelle worried that they would lose all the money they had saved for Ava’s college education. But thanks to new rules introduced in 2025, they now had the option to roll over up to $35,000 of unused 529 funds into Ava’s Roth IRA—tax- and penalty-free—providing both financial flexibility and a jumpstart to Ava’s retirement savings. The non-qualified account, not being education specific, comes with the flexibility to be used for any purpose and the Martinez family decided to earmark some of the funds toward a possible wedding in Ava’s future and anything left over toward her retirement savings.

This scenario may be hypothetical, but it illustrates the new opportunities available to families who are saving for education in 2025 as well as the potential need to consider flexibility. Thanks to the recent 529 tax law changes, parents can feel more confident that their savings won’t go to waste if their child’s educational path shifts. Especially if they consider diversifying their savings strategies.

Tips for Maximizing Your Education Savings

Whether your family’s situation mirrors the Martinez family’s or takes a different path, these tips can help you make the most of your education savings:

• Start Early & Automate Contributions: Like the Martinez family, automating monthly contributions helps you stay consistent with savings. The earlier you start, the more you can take advantage of compounding growth.
  
  

• Review Your Plan Annually: Back-to-school season is the perfect time to revisit your college savings plan. Use online calculators to adjust cost projections, review your investment strategy, and ensure your monthly contributions are on track.
  
  

• Maximize 529 Plan Flexibility: A 529 plan isn’t just for college tuition—it can also cover K-12 tuition (up to $10,000 per year), online courses, career training, student loan payments, and special therapies. Take advantage of these flexible uses to ensure your savings are maximized.
  
  

• Roll Over Unused 529 Funds to a Roth IRA: If your child’s educational plans change, the new 2025 rules allow you to roll over up to $35,000 of unused 529 funds into a Roth IRA (subject to meeting IRS guidelines). This gives you a way to preserve your savings and benefit from tax-free retirement growth.
  
  

• Explore State-Specific Perks: Some states offer tax deductions, matching grants, or tuition incentives for 529 plans. These benefits vary by state, so check annually to ensure you’re taking full advantage of available perks.
  
  

• Emergency Flexibility: While it’s always best to use 529 funds for educational expenses, emergencies can arise. You can withdraw funds for  non-qualified expenses,, but be aware that earnings will be subject to taxes and penalties unless limited and specific exemptions are met such as the death or disability of the beneficiary of the plan for example. It’s less favorable than qualified withdrawals but can offer a safety net if needed.
  
  

• Consider Diversified Savings Strategies: A 529 is not right for every financial situation. While a 529 has tax benefits that should be considered, often diversifying how you save can make sense as well to add flexibility to your plan. Other options to consider could be non-qualified accounts, UTMA/UGMA accounts, Roth IRA’s to name a few.  Often a combination of strategies may offer a balance between control of the assets, tax advantages and flexibility. Each option has its advantages and disadvantages and should be discussed to determine what is best for you and your family.
  
  

Family Conversations: Building Financial Confidence

One of the reasons the Martinez family was able to make such strategic decisions about their savings is that they involved Ava in the process. Every year, they sat down together to review their 529 plan, set new goals, and discuss the costs associated with Ava’s education. These open conversations not only strengthened their financial literacy but also empowered Ava to take ownership of her education and future financial decisions.

By making these discussions a regular part of their routine, the Martinez family ensured that Ava was fully aware of the financial implications of her educational choices. This type of transparency helped create a sense of shared responsibility, ultimately enabling Ava to make confident, informed decisions about her education.

Next Steps for Families Everywhere

Whether you live in New Jersey, Texas, California, or any other state, there are ways to tailor your college savings strategy to fit your family’s needs. Here are some next steps to consider:

• Customize Savings for Each Child: If you have more than one child, consider personalizing your 529 plans or other accounts based on each child’s educational needs. Whether your children are heading to college, private school, or vocational training, different strategies may be necessary.
  
  

• Change Beneficiaries Without Penalty: If your child decides not to attend college, you can change the beneficiary on your 529 plan without penalty. This flexibility means you don’t have to worry about losing money if your plans change.
  
  

• Use Plans for Special Needs or ABLE Account Rollovers: Some 529 plans allow you to transfer funds into ABLE accounts, which help pay for expenses related to special needs. This can ensure that your savings are still used effectively, even if your child’s path diverges from the traditional college route.
  
  

• Work with a Financial Advisor: Tax laws and education savings regulations can vary by state and change frequently. Working with a financial advisor who understands your state’s specific rules can help you optimize your savings and avoid any potential pitfalls.
  
  

Your Call to Action

This back-to-school season, take the opportunity to revisit your college savings strategy. With new rules and flexible options available, it’s easier than ever to make your savings work for your family. Whether your child is headed to college, a vocational program, or an alternative educational path, take action today to ensure that your savings are ready to meet their future needs.

For expert guidance on navigating the new rules and maximizing your college savings options, contact Genesis Advisor Group today. Together, we can craft a plan that supports your family’s unique goals, turning your education savings into long-term opportunity.

Contact Genesis Advisor Group for a personalized consultation and start making your education savings work harder for you.

Disclosures: Investments in 529 plans involve risks to principal and may involve additional fees such as enrollment charges and annual maintenance fees. 529 plans offer no guarantees. Depending on your state of residence and the state of residence of the beneficiary, the plan may or may not be eligible for state tax benefits. There are exceptions to the gift tax and estate tax exemptions; please contact a qualified tax, legal or financial advisor for more information prior to investing.

Securities and investment advisory services are offered through Osaic Wealth, Inc., a member of FINRA/SIPC. Osaic Wealth is separately owned, and other entities referenced are independent of Osaic Wealth.

Scott E. Jones, BFA™, CPFA®, CRPC®, RFC®
Founder & Financial Advisor
Genesis Wealth Advisor Group, LLC
Email: scott@genesiswealthag.com
Website:www.genesisadvisorgroup.com
“Your financial success story starts here.”