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For grandparents eager to help with rising college costs, U.S. Series EE savings bonds can be an effective tool. These government-backed bonds not only offer guaranteed growth but can also deliver valuable tax benefits when used for qualified education expenses. While they may not replace a 529 plan or other investment accounts, EE bonds can be a stable complement for families seeking predictable, low-risk returns.

With tuition costs climbing faster than inflation, many grandparents are looking for safe ways to contribute without risking their savings. EE bonds promise steady accumulation, a government guarantee and potential federal tax exemptions, making them a simple yet powerful piece of a long-term education plan.

What Makes EE Savings Bonds Unique

Series EE bonds are issued by the U.S. Treasury and guaranteed to at least double in value after 20 years. They continue earning interest for up to 30 years, offering a long-term growth option that does not depend on the market performance. You can buy them electronically through TreasuryDirect in denominations starting at $25, up to a $10,000 annual limit per person.

This makes EE bonds a flexible way for grandparents to save gradually over time. The interest earned is exempt from state and local taxes, and federal taxes can be deferred until the bonds are cashed in or mature. Unlike volatile investments, these bonds give you the peace of mind that your contribution will grow steadily regardless of market conditions.

Education Savings Bond Program’s Advantages

The biggest draw for using EE bonds toward a grandchild’s education is their eligibility for the Education Savings Bond Program. Under this program, the interest earned on Series EE or I bonds can be excluded from federal income tax, but only if certain criteria are met.

To qualify for the exclusion:

1. The bond owner must have been at least 24 years old when the bond was issued.

2. The bonds must have been issued after 1989.

3. The proceeds must be used for qualified higher education expenses, such as tuition and mandatory fees at an eligible institution.

4. The bond owner’s modified adjusted gross income must be below the IRS’s annual phase-out limit.

5. The bonds must be redeemed in the same year the educational expenses are paid.

How to Structure Savings for a Grandchild

When buying savings bonds for education, ownership structure matters. To qualify for the tax exclusion, the bonds must be registered in your name (or jointly with your spouse). If you purchase the bonds in your grandchild’s name instead and they were under 24 when issued, the education tax benefit will not apply.

The most common approach is for grandparents to buy and hold the bonds in their name, then redeem them when the grandchild starts college. The proceeds can be used directly to pay tuition or even rolled into a Coverdell Education Savings Account. This strategy keeps the tax benefits intact and gives you flexibility in how and when to use the funds.

Balancing Stability & Growth

While Series EE bonds guarantee a return, their yields tend to be lower than what you may earn through a diversified investment portfolio or a 529 plan. EE bonds are guaranteed to double in 20 years — equivalent to an average annual return of 3.5% — but tuition costs often rise faster than that.

That is why EE bonds work best as a supplement and not the sole source of education funding. Their real value lies in safety, simplicity and tax advantages, making them ideal for grandparents who want predictable growth and minimal risk exposure. Combining EE bonds with other savings tools, such as 529 plans or direct tuition payments, creates a balanced strategy that covers both growth potential and security.

Bottom Line

Series EE savings bonds may not deliver the highest returns, but they offer something many investments cannot — certainty. For grandparents looking to support their grandchild’s education without taking on unnecessary risks, EE bonds can be a simple and rewarding choice.