Have you considered how you can use your life insurance policy to pay for your children’s tuition and expenses?
The last three decades have seen college tuition increase upwards of 260%. A child born today might expect to spend approximately $250,000 to cover the in-state tuition at a public university for a 4-year degree, not including room and board, books, or travel costs.
The number of alternatives marketed to families for the purpose of college planning can cause analysis paralysis. Should they set up a 529 plan in or out of their state? How about a pre-paid college plan? Not to mention the tax implications both now and upon withdrawing from these strategies.
One solution that most families don’t typically consider is using their existing life insurance. Perhaps you’ve considered taking a line of credit against your 401(k), a retirement account, or your home. Have you considered leveraging your life insurance as collateral for a college planning loan? Taking advantage of a whole life policy to cover college costs has the benefit of locking in low premium rates for the life of the policy while ensuring the tax-free growth of cash-value. Whereas other college savings vehicles are considered in the calculations for financial aid, life insurance policies are not included in the federal methodology, which means that the student and their family will not be penalized for having saved for college. Best of all, a life insurance policy generates flexibility, providing benefits that surpass the family’s college-planning needs.
This strategy requires that parents begin planning early. Though, if your student is college-bound soon, liquidity for their tuition can be accessed through a cash-value loan based on their parents’ or grandparents’ policy. Unlike other restrictive college planning strategies, the whole life cash-value loan can be utilized for any of the expenses that the student might incur for their education, even if they are not direct relatives of the policy-owner.
Together, we can contribute to a successful and less stressful college experience for both students and their parents!
