Attending college–one of the most important and expensive times of our lives. During this time, many are looking for creative ways to pay for this worthwhile investment. Whether you are a student, parent, grandparent or employer, keep reading to discover unique ways to pay for college.
Technique 1: Take advantage of 529 Savings Plans
Although these plans have certain limitations, they are designed specifically for this time. These plans are great options to help your child afford college. 529 Plans are tax-free to the student. So they won’t be charged on the earnings as long as the money is used for legitimate educational purposes. In addition, certain states offer special tax deductions to residents who choose to take advantage of these plans. States that offer tax deductions include Arizona, Kansas, Maine, Missouri, Montana and Pennsylvania.
The drawback of such a plan is that the funds must be used for a 4-year accredited university. If the beneficiary of this plan decides to go to a trade school, open a business, or skip college altogether, the money is tied up. This factor must be considered when investing in such plans.
For more information regarding 529 Plans, please visit: http://www.savingforcollege.com/college_savings_201/.
Technique 2: Use a Term with ROP Life Insurance Policy that offers scholarships
A term life insurance policy with a Return of Premium Rider is a great way to put money aside for your child’s education. First, your life is insured in the event that something happens to you. As a result, your beneficiary’s education is secure. Second, after a set amount of time, you can cash out every penny you paid for this policy, with an interest on top of that (usually around 2.5%). If planned properly, you can cover your child’s educational needs. In addition, certain life insurance companies offer scholarships to their members of up to $8,000 in value toward a 4 year university. To qualify, you must own their policy.
Technique 3: Consider an Index Universal Life Policy
A Universal Life policy can accumulate a cash value designed to pay for the education of your children. These policies earn on average 8% interest on your investments, protect your income and can be used for any type of expense needed (unlike 529 Plans). The money invested in these plans is secure from sudden market drops (unlike 529 Plans). If the cash value is borrowed from the policy, in most cases, you do not pay income tax. If the cash value of the policy is withdrawn, you’d have to pay taxes on the earnings. This is my favorite method to save for college, simply because of the freedom, security and benefits a life insurance policy can offer.
Technique 4: Convince your employer to invest in your education
Your employer can choose to contribute to your education as an added benefit of working in their company. In 2013, if they contributed under $5,250 toward your college education, you did not have to pay taxes on that.
Ultimately, whichever path you take in planning for college, the key is to start early! The sooner you begin this process, the more options you’ll have.