How to Use Life Insurance to Fund a College Savings Plan
College tuition keeps rising—and for many families, traditional savings accounts and 529 plans don’t offer the flexibility or protection they’re looking for. That’s where permanent life insurance can step in as a powerful college funding tool.
Permanent life insurance, such as whole life or indexed universal life, builds cash value over time. This cash value can be accessed tax-free through policy loans and withdrawals—and used to help pay for tuition, room and board, or other education-related expenses.
One of the biggest advantages of using life insurance for college planning is that the cash value isn’t counted against you in the FAFSA formula for federal student aid. That means families can maintain eligibility for need-based aid while still building a tax-advantaged pool of money they control.
In contrast to a 529 plan, life insurance offers flexibility. You’re not limited to educational expenses, and if your child doesn’t go to college, the funds can still be used for other purposes—or left in the policy to support retirement or legacy goals. It’s also a great backup if financial aid doesn’t come through.
At Diversified Insurance Brokers, we help families explore life insurance strategies that align with college funding needs, financial aid goals, and long-term protection. Our advisors understand how to structure policies properly—so you get maximum benefits without overfunding or unintended tax consequences.
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Ready to explore insurance and annuity options that offer guaranteed income, principal protection, disability, life insurance, Social Security and Medicare reviews, and long-term financial growth? Let the expert advisors at Diversified Insurance Brokers help you find the right strategy for your retirement goals.
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