It seems that today, the cost of a higher education has continued to rise, regardless of what else is happening in the economy. In fact, according to CollegeData.com, the average price tag for an in-state public college for the 2013-2014 school year was just under $22,900. For those who opted for even a moderately priced private college, costs were closer to $44,750 per year.
It’s easy to see how the price can add up – especially when factoring in all of the ancillary expenses. For example, in addition to just the tuition, most colleges and universities charge “fees,” which can include anything from registration to parking costs to library access for students. There are also books and other necessary supplies such as pens, notebooks, and folders.
Students who will be residing on campus also need to factor in the cost of housing and meals. College Board estimates the average price tag for these expenses in 2013-2014 to be roughly $9,500 at four year public schools, and just below $10,900 at private colleges and universities.
Given the high price tag today, those who have young children will typically start saving early for what will likely be an even higher cost in the future. So what happens if a parent or other loved one who was helping to put money towards that cost were to unexpectedly pass away?
Your family would be left with all of your debts and unpaid expenses. On top of all that, they would struggle to pay for the costs of paying for college.
Unfortunately, without the proper planning, it could mean that a child would go without the college education that he or she had hoped for. With the right plan in place, however, that child could continue onward with their dreams.
The Traditional Methods of Saving for College
In most cases, people turn to bank savings account and other types of traditional investment vehicles when setting aside funds to save for a child’s future education. Yet, as these funds grow, the interest that is earned is typically considered to be taxable as income – and, because of this, it will decrease the actual growth that is achieved on these savings.
Many people will pay the tax that is due with the funds that are received from their current income – or, they end up withdrawing some of the interest that was earned in order to pay the amount that is due. In either instance, the result is essentially the same.
How to Ensure that College Funds Will Be There – No Matter What
Using life insurance as a funding vehicle for college savings can offer an excellent solution for the tax issue that many people face. It can also provide additional benefits as well. With this in mind, there are a couple of ways in which life insurance can be structured when using it as a college savings tool.
The key advantages of using life insurance for college savings include:
- Tax Deferred Growth – When an individual own a permanent life insurance policy such as whole life or universal life, the cash value that builds up inside of that policy is allowed to grow on a tax deferred basis. This means that there are no taxes due on that money until the time of withdrawal. Therefore, when a child is born or is very young, the parents can take out a life insurance policy on the life of the child (provided that the child is healthy enough to qualify for coverage). Because the child is young, even a large policy can typically be purchased for a small amount of premium. As premium payments are made into the policy over time, the cash value will begin to grow. When the time comes for the child to attend college, one of two options are available. One is that the policy may be cancelled and the cash used for paying college expenses. The other is that the policy may be kept in force and the cash simply borrowed at a low rate of interest for college expenses. This way, the child can continue to maintain life insurance coverage throughout the remainder of his or her life.
- Secure Savings – A second advantage of using life insurance to fund college expenses is that it can provide secure savings. Here, a second funding option would be to purchase a cash value life insurance policy on the life of one or both of the child’s parents when the child is very young. In this case, cash could build up in either one or two policies, and then be used when the time comes for college. Should either or both parents pass away prior to the time that the child attends college, the death benefit proceeds from the policies can be used for funding college expenses instead.
Starting Your College Funding Plan
If you’re ready to begin your secure college funding plan, the place to start is with obtaining quotes from different life insurance carriers. This way, you will get a better idea of which insurer can offer you the best plan for your specific needs.
Unlike traditional insurance agents that can only give you quotes from one company, our independent agents can give you quotes from dozens of highly rated companies at once. Because there are thousands of insurance companies on the market, you could spend weeks trying to find the lowest monthly premiums, or you can let us do all of that work for you.
At Life Insurance United work with many of the top rated life insurance carriers in the marketplace and can help you get started. In order to do so, simply fill in the form on this page and submit. We can also help to answer any additional questions or concerns that you may have by contacting us directly at 855-900-5433. We are dedicated to helping you the protection that fits your family’s need the best, without breaking your bank.
Life insurance is one of the most important investments that you can make for your loved ones, especially if they are going to have college expenses in the future. If you were to pass away, your family could struggle to pay for the costs of college. Having a life insurance policy is the best way to ensure that they have the money they need to avoid any financial struggles.
You don’t know what’s going to happen tomorrow. Because you can’t predict the future, you shouldn’t wait any longer to purchase the life insurance protection that your family deserves. Waiting too long could leave your family with thousands of dollars of debt, and no money to pay for higher education, which can totally devastate the future of your children. Let us help you find the perfect policy at an affordable rate.