If you have read the papers or listened to the news lately, you are probably well aware that the cost of a college education keeps rising — generally, at a rate higher than the rate of inflation. A private college that would have charged $12,000 per year for tuition and fees in 1990 is likely to charge at least double that amount today. And public colleges are also more costly than you might imagine. The numbers can be troubling for parents with children who are planning to attend college one day. Of course, there are a number of ways to cover the expense of a college education. Student loan programs can help (assuming the student and/or family qualifies), and there are grants and scholarships available for many students. A part-time job or work-study program may help, too. But, in most cases, a student’s parents will have to come up with a significant amount of money. At least a portion of the needed funds will likely come from savings and investments. That might include Coverdell Education Savings Accounts, money from U.S. savings bonds (which are tax-advantaged if spent on college expenses), money from mutual fund investments, or funds placed in qualified state tuition programs (so-called “Section 529 plans”). These are all helpful sources, but there is another effective way to accumulate money for college that is often overlooked: cash-value life insurance. Not only is it a way to save money for a child’s education, but it also provides a guaranteed source of funds in the event of a parent’s premature death. Cash value life insurance has a number of advantages as a college financing tool. First of all, it serves as a supplemental savings plan since the cash value of the policy increases with each premium payment. Second, this “savings element” grows at a guaranteed rate and is also tax sheltered. Third, when the time comes to begin paying for a student’s tuition, room, board, fees, etc., the parent can borrow against the policy’s cash value at favorable interest rates. The parent can then repay the loan principal at his or her convenience, or not at all. Fourth, the cash value of the policy will not be counted as an “asset” in determining a family’s financial aid. Finally, the cash-value life insurance coverage can provide peace of mind for the parents of young students. They can feel confident that, even if one parent should die prematurely, funds will be available to cover the child’s college education expenses. Naturally, the use of cash-value life insurance is only part of an overall plan to pay for college costs. And, a life insurance program that is earmarked for education expenses should supplement — not replace — your existing life insurance program. Why not give us a call. We can help you explore the ways cash-value life insurance can help ensure that your child receives the college education he or she wants — and deserves.
Education Insurance
