Rather than lament the realities of how the college, federal, and state aid funding works, let’s concentrate on how we can best position ourselves to be beneficiaries rather than victims. Want to know why the cost of college is going up far faster than inflation and why colleges seem to be able to raise their tuition at will? Short answer is because they can. There is a flood of money available through government programs and loans. It has never been easier for families to go into massive debt for college. It’s another bubble, created by willing partners in education, government, banking, and, of course, our political leaders. Families wanting college funding are a large and willing constituency for government programs. Congress will also take credit for special saving programs touted to help families save for college, but the biggest fans of those programs are financial planners who lock up your savings in tax-privileged accounts like Coverdells, 529-qualified tuition plans, and UGMAS/UTMAS, and collect their fees for doing so. Even CPA’s are often confused with how these plans work with educational tax breaks.
And now that banks have this new boon of college loans that can never be cancelled in bankruptcy and can even be collected by the IRS for delinquency, the government has become an even better banking partner.
Prosperity economics advisors don’t like giving away control of our assets, so prepaids, UTMAS and UGMAS are not recommended. Coverdells and 529 plans have market risks, limitations on how much can be saved, and how they’re used, not to mention the rules can change with the political winds. In the last market meltdown, stocks and bonds both had huge losses. Even in the best-case scenario, if your timing is right and the stocks and bonds in your Coverdell or 529 plans meet or exceed the assumptions of our financial planners, the assets still count against your financial need at the parental rate according to the FAFSA and CSS Profile. Banks provide safety, but certainly not the growth we need to keep up with inflation, let alone college tuition. These are the savings vehicles offered by typical financial planners, and advertised on government, mutual fund, and banking websites for college saving. If only there were another choice. There is. I discovered it after seeing it used by many wealthy families, and you will be surprised by how it meets and exceeds your needs for safe, long-term saving for college and beyond.
A specially designed whole life insurance policy from a dividend-paying mutual fund company will meet our college savings needs without market risk, provide liquid funds outside the FAFSA or CSS Profile purview, protect those savings from litigation, and as an added benefit, provide the peace of mind and assurance of college funds even if you were to die early. Even in this low-interest rate environment, you can expect an internal rate of return of 4 to 5 percent, with no down years. The dividend rate rises with inflations, has a history of 2 to 3% over bank interest rates, and can actually be competitive with a mutual fund advertising an “average” return of 12 percent. I know this seems mathematically impossible, but there’s a huge compounding advantage in consistent returns against the ups and downs of market-based investments. We can show you.
Through Whole Life tax-free policy loans, you can pay for college or any other large expense. The accumulation of cash value inside the policy gives you the ability to become your own family bank, following the same wealth-building strategies of some of the richest families in the world. We design our policies to build cash value, and use policy riders to add more cash without adding more commissions or fees, making this flexible savings vehicle one of the most economical options available . It is a paradigm shift to see something that is usually considered a cost, and normally valued for just its death benefit, become a savings platform that provides a competitive return with so many other living, trust-like benefits. It does all this over the long term with commissions and fees less than a typical mutual fund. And unlike more risky options, these policies have safely performed through deflation, inflation, depression, financial crisis, and every war for over 100 years.
A prosperity economics advisor can show you how to use a specially designed whole life policy to save for college funding and create a financial engine for your family to provide generational wealth, assurance rather than assumptions, and peace of mind. One way to pay tuition may be to just borrow from the mutual insurance company against the policy’s cash value for college and then use prosperity economics guidelines to pay back your family bank at your own pace. No credit checks, no paperwork, just a call to the mutual insurance company to get your cash within a week . By keeping your dollars moving, doing many jobs, rather than just one, your focus is on cash flow, not net worth. Another tactic may be to borrow against some of your policy cash value to put a down payment on an investment house near the college, which could, in turn, provide rent and cash flow to pay for tuition. This is an example of (prosperity economics principle #5: move) using your cash value for other investments that will generate the needed cash flow to do other jobs. Finally, unlike a single-purpose account like an IRA or 529 plan, a properly designed whole life policy creates a tool that has the flexibility to meet many purposes like retirement, emergency funds, education, car purchases, business investments, and any number of other opportunities (prosperity economics principle #7: multiply). A prosperity economics whole life policy can multiply the things you do with your cash—all in one dynamic, safe, flexible, private account.
I learned a lot from the grandparents and parents who had saved for college with dividend paying life insurance. Most of them had themselves benefitted from family insurance policies and were now continuing to build their family wealth by investing in the younger generation, while passing on the tradition of continued savings. Perhaps this win-win solution to college is right for your family as well.