Should I make tuition payments directly to my grandchild's college or should I contribute to a 529 plan instead?
Direct payment of tuition to an educational institution is not considered a taxable gift. Therefore, you're able to "give away" more than $15,000 per year (the annual federal gift tax exclusion) for your grandchild's college education and not worry about gift taxes. However, colleges may reduce a student's institutional financial aid by the amount of your payment. So before sending a check, ask the college how it will affect your grandchild's eligibility for college-based aid.