This is what you need to do to avoid grandparents having to pay tax in future years.  Instead of grandparents taking money out to either pay school or reimburse whoever did pay school, have the 529 send the money directly to the school.  If you do it this way, while you won't avoid tax, you will avoid tax on the grandparents.  If the money is sent directly to the school, any tax attributable to the Q will be taxable to the student.