Will Your Clients Need to Worry About Student Loan Interest Rates?

With the cost of a college education climbing higher every year, it is no wonder that more than 70% of all students graduating from four-year colleges have at least some amount of student loan debt. Depending on whether a student attends a public or a for-profit institution, this figure could actually rise to nearly 90%.1

According to the Institute for College Access & Success, in 2012, the average student debt levels for all graduating seniors with student loans rose to more than $29,000 – which equates to a 25% increase from 2008.2

While student loans are typically known for carrying low rates of interest, when the repayment is stretched out over a number of years, the dollar amount that is paid back can still be quite substantial.


Planning Ahead for College Expenses

There are many parents who plan ahead for the cost of their children’s higher education. One way to save on a tax-deferred basis is to use a traditional 529 college savings plan. In doing so, the money that is contributed is allowed to grow without taxation – and if the funds are withdrawn for the purpose of paying for tuition, room and board, and other education-related costs, there can also be added tax savings.

But these plans can also have some drawbacks – one being that, if the child ends up not attending college in the future, the tax benefits can be lost. In addition to that, there are limits on how much money can be in the 529 college savings plan account. For instance, the overall balance in the plan is not allowed to exceed the anticipated cost of the recipient’s college expense.

With that in mind, there is a way to either replace, or add to, the money that is being saved for college costs. That is through a permanent life insurance policy.


Using Life Insurance to Save for College Expenses

With a permanent life insurance policy, the money that accumulates in the plan’s cash value component is allowed to grow tax-deferred – similar to a 529 plan. But the life insurance policy can also provide added benefit that is not found in the traditional 529 savings plan.

One advantage is that there is no limit on how much money is in the insurance policy’s cash component – so, as the cash value grows, the tax-deferral allows it to compound exponentially. The life insurance funds can also be used for any want or need by the policy holder. So, if it turns out that college isn’t in the plan going forward, these funds are still available for purchasing a vehicle, putting a down payment on a home, or any other need or want.

In addition, life insurance offers a “self-completing” attribute in that, just in case the insured – who is oftentimes a parent or grandparent – passes away, the policy’s death benefit will be paid out (free of income taxation) and can also be used for funding the child’s future college expenses.

With the flexibility that is afforded by permanent life insurance, it can make sense to include this financial vehicle when offering college planning solutions to your clients. And, by adding this type of expertise to your overall offerings, you can also become known as the go-to advisor for college planning.

If you’d like to add thousands of additional commission dollars each month to your bottom line, while at the same time relying on a consistent and reliable source of leads who are ready to talk to you, then just give us a call at 1-800-643-6143 and we’ll give you all of the information that you need to get started.

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Brian J. Kay, Executive Director, Leads4Insurance
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