Marine surveys by robotic underwater and surface vehicles result in substantial quantities of coral reef imagery, however labeling these images is expensive and time-consuming for domain experts. Point label propagation is a technique that uses existing images labeled with sparse points to create augmented ground truth data, which can be used to train a semantic segmentation model. In this work, we show that recent advances in large foundation models facilitate the creation of augmented ground truth masks using only features extracted by the denoised version of the DINOv2 foundation model and K-Nearest Neighbors (KNN), without any pre-training. For images with extremely sparse labels, we use human-in-the-loop principles to enhance annotation efficiency: if there are 5 point labels per image, our method outperforms the prior state-of-the-art by 19.7% for mIoU. When human-in-the-loop labeling is not available, using the denoised DINOv2 features with a KNN still improves on the prior state-of-the-art by 5.8% for mIoU (5 grid points). On the semantic segmentation task, we outperform the prior state-of-the-art by 13.5% for mIoU when only 5 point labels are used for point label propagation. Additionally, we perform a comprehensive study into the number and placement of point labels, and make several recommendations for improving the efficiency of labeling images with points.