12 Topics to Help Your Clients with College Funding

September 5, 2023 |read icon 5 min read
A young woman and her mother meeting with a college admissions counselor.

The best service you can provide your clients as they plan for the college-expense years is to help them plan with a long-term perspective. It’s also essential to have a comprehensive understanding of various aspects related to college funding and planning. Here are some key points you should know to better help your clients:

  1. Types of education accounts: Familiarize yourself with the different types of education savings accounts, such as 529 plans, Coverdell Education Savings Accounts and custodial accounts (UTMA/UGMA). Understand the tax benefits, contribution limits and restrictions associated with each account type.
  2. Cost of education: Stay up to date with the current and projected costs of education, including tuition, fees, room and board for different levels of education. This will help you set realistic savings goals for your clients.
  3. Financial aid options: Be knowledgeable about various financial aid options, including scholarships, grants and student loans. Understand the eligibility criteria and potential impact on other savings strategies.
  4. Investment strategies: Provide guidance on appropriate investment strategies for education savings accounts based on your clients’ risk tolerance, time horizon and specific education goals.
  5. Estate planning: Help your clients consider estate planning implications related to funding education for their children or beneficiaries. Review how educational expenses fit into their overall estate plan.
  6. Tax implications: Explain the tax implications of education planning, such as the tax-free growth and withdrawals for qualified education expenses in certain education savings accounts.
  7. Flexibility in savings: Advise your clients on keeping flexibility in their education savings plans. Ensure they have the flexibility to redirect funds if educational goals change or if the beneficiary decides not to pursue higher education.
  8. Matching contributions: If your client’s employer offers a matching contribution program for education savings, help them take advantage of these benefits to maximize their savings.
  9. Timely adjustments: Regularly review and adjust the education savings plan based on changes in the family’s financial situation, investment performance and educational goals.
  10. Federal and state incentives: Stay informed about any federal or state-level incentives, grants or tax credits related to education savings that your clients may be eligible for.
  11. FAFSA process: Familiarize yourself with the Free Application for Federal Student Aid (FAFSA) process and help clients understand its importance for determining financial aid eligibility. Don’t forget to review the FAFSA deadlines every year.
  12. Long-term planning: Encourage your clients to start education planning as early as possible, as it allows for more time to accumulate savings and potentially benefit from compound growth. Share this blog article with your clients that includes tips for parents and students to help pay for college.

Consider life insurance

Death benefit protection can make life insurance an attractive choice for creating a self-completing plan to help fund a college education. While many people are aware that the cost of a college education is on the rise, many underestimate just how large this cost has grown. At the same time, many families lack adequate life insurance protection. With the right life insurance policy, they can secure needed death benefit protection while gaining a way to help pay for a college education.

Using life insurance to help pay college expenses:

  • Your client buys a permanent life insurance The policy provides death benefit protection and a way to help accumulate cash value on a tax-deferred basis.
  • If the unexpected happens and your client dies prematurely, the life insurance death benefit would be paid generally income tax-free to your client’s beneficiaries.
  • Alternatively, when it comes time to pay tuition costs, your client may access the policy’s potential cash values through loans and withdrawals. Keep in mind that tax law allows a policy owner to withdraw life insurance policy cash values up to the policy owner’s basis or investment in the contract without income tax consequences. Withdrawals and loans will reduce the available death benefit. Withdrawals beyond basis may be taxable Excess and unpaid loans will reduce policy value and may cause the policy to lapse. If a policy lapses, unpaid loans are treated as distributions for tax purposes.
  • After helping to pay tuition costs or if plans change, your client may reposition the policy for other possible needs, like helping to supplement their retirement Remember, cash value withdrawals are not mandatory and may occur at any time.

Purely from the standpoint of college funding, using permanent life insurance may be difficult to justify for most clients unless you weigh the added lifetime advantages of the life coverage. Running an illustration to show the advantages of the death benefit and the potential cash-accumulation opportunity after the college years become clear:

  • Death benefit protection.
  • Self-completion.
  • Locked-in investment gains.
  • Access to cash throughout the policy owner’s life, beyond the college expense years.

Getting started

By staying informed, you can help your clients make informed decisions and achieve their educational goals for themselves or their loved ones. Ameritas has many advantages which support education planning.

Learn more about our life insurance portfolio.

See the 529 plans selling agreements offered through AIC/AAS.

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