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Education Funding Plans and Strategies

Planning to pay for college takes time and dedication with a goal in mind — whether that’s to maximize your college savings or pay off your student loans. No matter where you are in your college journey, we can help you to reach your goal. If your child is young, establishing a savings plan now can put time on your side.

Education funding vehicles could be as following.

Coverdell Education Savings Account
If your income qualified, you can contribute up to $2000 a year to a Coverdell Education Savings Account for each of your child or grandchild under age of 18. All withdrawals (including investment earnings) that are used to pay the child’s qualified education expenses are income-tax free.

529 Plan
A 529 plan is a tax-advantaged savings plan designed to encourage savings for future education costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.

Permanent Life Insurance with Cash Value Accumulation Purpose
Life insurance with cash value accumulation purpose such as Index Universal Life and Whole Life etc. works well as a college savings vehicle. For every dollar you pay in premiums, a portion goes toward the death benefit and another portion is diverted to a separate cash-value account. The funds in the cash-value account grows tax-deferred. When it’s time for college, Withdraw or loan can be taken out against policy cash balance to pay for college expenses.

Custodial Accounts
A custodial savings account is a savings account that you set up for the child but have full control of until they reach legal age. You contribute to the account as you would to Roth IRA or 529 plan. An account manager invests the money for you.

Financial Aid
Most schools have a limited pool of funds, so you should file financial aid forms as soon as possible. Generally, the school will calculate how much aid your child will receive based on your financial situation. Also, your child should apply for all available governmental or private grants and scholarships.

Each plan has its pros and cons. Carefully planning with a Qualified Financial Professional together will be highly recommended towards family College Education Funds Planning.

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