With the exception of possibly the Department of Motor Vehicles or The Post Office during the holidays, few organizations are as frustrating for students to visit as the Office of Financial Aid. Today’s current students and soon-to-be college initiates are facing the most expensive tuition costs ever, more than double what students were paying in the 1980s. Despite wage increases since 1970, tuition rates hike every year faster than wage increases can manage, meaning that a dollar doesn’t go as far to begin knocking out student loans or to manage with traditional college savings plans.
Tuition costs are increasing at an alarming rate, but more and more jobs require some kind of licensure to get into the field, attending college has become a norm for many Americans. Government assistance is available for students who need the aid, but often times this means students must saddle themselves with massive loans in order to attend or look to loved one who were generous enough to put aside money for their education.
However, there are restrictions for assistance and aid, meaning middle and low-middle class families that have saved or make just a bit over a predetermined financial marker might not be able to receive vital assistance because of what their situation looks like on paper. The system is convoluted and it gets more complex every year. What is a person to do?
Navigating The Savings Waters
Saving for college sounds like it would be straight forward, but it’s actually a complicated mess. For example, if a well meaning grandparent or parent where to set up a small college fund to aid with books or supplies, but not tuition, they actually might make things more costly for the student. When a student applies for assistance from the Free Application For Federal Student Aid (FAFSA) program, unless they are active duty military or 25 years old and considered a legal independent, the assets of their family or any accounts set up for their education expenses are scrutinized and considered for eligibility. This means that a small college savings fund meant for a 4 year term to buy supplies might disqualify students from financial aid.
There are savings plans that are meant specifically for college savings, but many of them have downsides. Take for example the 529 College Savings Plan, which many people use to save for college because of its growth potential and tax deferment status. The money that’s put into the 529 plan is invested in the market to allow for growth and the money can be withdrawn from the plan for “qualified higher education expenses” without taxation.
The problems with this plan as a college savings vehicle are obvious. Market volatility, consumer confidence, and recession shouldn’t have an effect on what you save for college, but the 529 subjects the funds to the hot-cold nature of the stock market. Furthermore, there is a stipulation of how the money is to be spent, subjecting college savings to tax penalties if the funds aren’t spent on “qualified expenses” which do not include food, gas, clothes or other costs of living. Finally, the most obvious reason why the 529 isn’t a great choice for college savings is because the value must be reported to FAFSA, resulting in a larger burden on students or their families, even though they had the foresight to save.
Saving With The Infinite Banking Concept
Instead of saving with plans that are subject to massive tax hits when you want to use your money that you saved or losing necessary grants and scholarships from FAFSA because you were able to save, you can apply the Infinite Banking Concept to maximize your savings and keep the control of funding in your hands.
Using a specifically designed whole life insurance policy with a built in and guaranteed cash value gives parents or students the ability to pay necessary costs without qualification and without losing value to taxation. Savings in a whole life insurance policy do not have to be reported to FAFSA, giving your student the opportunity to receive grants and scholarships on top of the money from the policy.
Finally, if you use penalty free policy loans to pay for tuition, a student doesn’t need to come out of college with massive government sponsored debts while trying to secure a job with their education. Policy loans can be paid back as quickly or as slowly as you want without the threat of wage garnishment or the loss of professional licensing.
Are you already finished with college and in the process of repayment? The power of the Infinite Banking Concept is that you can use the same cash value to help pay back student loans, recapturing the debt and paying the interest back to yourself rather than the government. This system grants practitioners true financial freedom and nothing is so vital to someone just starting their journey than the chance to spread their wings without massive debt responsibilities.
Our team at Factum Financial wants to see young people set up for life with a little bit of planning now. We can help you structure a policy for college savings that will set students miles ahead of their peers who are coming out of school buried under student loans. Contact a member of our team to schedule your free 30 minute wealth strategy now.
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