8 College Savings Strategies Virginia Grandparents Accidentally Get Wrong

The 2027-28 FAFSA form opens to families next month, on October 1, and it will treat a grandparent-owned Virginia529 account exactly the way the last two versions did.

But that’s not how it used to work.

For years, the same kind of account could shrink a grandchild’s financial aid without a family ever seeing it coming.

These are the college savings strategies Virginia grandparents get wrong without meaning to.

Note: This is general information, not financial or tax advice. 529 rules, tax deductions, and financial aid formulas are subject to change.

1. Skipping Invest529’s Survivor Form

Grandparents who skip Invest529’s Designated Survivor form are betting the account passes cleanly to whoever they meant it for, without ever confirming that’s how Invest529 handles it.

Many grandparents never fill it out.

Without one, Invest529 can hand the account straight to the grandchild once they turn 18, no restrictions attached, or set up a custodial account if the student is still a minor.

That’s a costly gap.

The form takes a few minutes online, and it keeps the account in the hands the grandparent chose.

2. Sitting on Old FAFSA Advice

Virginia grandparents who opened a Virginia529 account years ago were often told to let the money sit until a grandchild’s junior or senior year of college.

That advice made sense under the old Free Application for Federal Student Aid (FAFSA) rules, which counted a grandparent-owned 529 distribution as untaxed income the year after it happened.

Not anymore.

The FAFSA overhaul already removed that penalty starting with the 2024-25 form, and the same treatment carries into the version families are using right now.

Grandparents still spacing out withdrawals to dodge a penalty that no longer exists just hold back help a family could use today.

3. Assuming CSS Profile Follows FAFSA’s Lead

Grandparents who assume every college treats a Virginia529 account the way the new FAFSA does are relying on a rule that doesn’t reach every school.

Not every school agrees.

Roughly 200 private colleges still require the CSS Profile, a separate aid application, for their own institutional aid decisions.

The CSS Profile still asks about a grandparent-owned 529 account, and many CSS Profile schools can factor it into their own aid decisions.

Virginia’s own Washington and Lee University and University of Richmond are both on that CSS Profile list.

A grandchild applying to a CSS Profile school can watch aid shrink over an account the FAFSA now leaves alone completely.

Ask which form a target school uses before assuming the FAFSA’s new rules cover the whole application.

4. Writing One Oversized Check

One oversized check funds a Virginia529 account more often than a spread-out gift does, especially when a grandparent has cash to spare.

In 2026, a single gift above $19,000 from one grandparent, or $38,000 from a married couple, to one grandchild triggers a gift tax return, even when no actual tax ends up due.

That paperwork is avoidable.

A special election lets a grandparent treat one lump sum as five years of gifts at once, covering up to $95,000 from a single grandparent or $190,000 from a couple without triggering the filing.

Skip that election, and a generous gift turns into an unnecessary form for a tax preparer to sort out.

Virginia’s own public colleges now average $15,356 a year in tuition and mandatory fees, up $510 from last year alone, so every dollar that dodges a paperwork trap is a dollar that keeps growing instead.

5. Assuming They Can Take It Back

Grandparents who fund a Virginia529 account while assuming they can pull the money back out later are counting on a flexibility the account doesn’t offer.

A contribution to the account counts as a completed gift, which is what keeps the money out of the grandparent’s own taxable estate.

Change your mind and reclaim it. That protection reverses.

No do-overs.

Revoking a grandchild’s 529 gift, according to Saving for College’s own guidance for grandparents, adds the contributed value straight back into the grandparent’s taxable estate, undoing the exact benefit the account was built to lock in.

Grandparents who treat the account like a fund they can dip into risk losing the entire estate-planning point of opening it in the first place.

6. Leaving Virginia’s Deduction Unclaimed

Virginia lets Invest529 account owners deduct up to $4,000 per account per year from state income tax, with an unlimited carryforward for anything above that.

A grandparent funding three grandchildren through three separate accounts can claim that deduction three times over in the same year.

Many just write one combined check into a single account and cap their own break at $4,000.

Turning 70 changes the math.

A Virginia taxpayer 70 or older can deduct an entire year’s contribution in one shot, with no $4,000 ceiling in the way.

7. Assuming Prepaid529 Still Takes Enrollees

Grandparents who enrolled an older grandchild in Prepaid529 are counting on the same program still being open for a younger one.

It isn’t.

Prepaid529 closed permanently to new enrollment on May 1, 2019, and nobody can buy a new contract under that program today.

Invest529 replaced it with the Tuition Track Portfolio, which sells units tied to the average cost of in-state public tuition instead of locking in a state-backed contract.

A grandparent who assumes the old program covers a new grandchild can miss enrollment entirely and default into a plain savings account with none of the tuition-indexed protection built in.

8. Fearing to Overfund the Account

A fear of overfunding keeps some Virginia529 accounts smaller than they should be, since grandparents worry the leftover money would sit trapped if a grandchild skips college or lands a scholarship.

That fear is outdated now.

Federal rules let up to $35,000 of unused 529 money roll straight into a Roth individual retirement account (Roth IRA) in the grandchild’s own name.

The account has to be at least 15 years old first, and the rollover still follows the beneficiary’s normal annual Roth contribution limit.