College Debt: Avoiding the Ultimate Parent Trap

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College loan debt has topped $1 trillion and that debt load is threatening parents’ ability to retire as well as students’ financial future.

For college graduates, repaying student loans often means postponing buying homes or cars, getting married, and saving for retirement. With few options available, students often turn to their parents to bail them out. A recent Pew study found that “39 percent of all adults ages 18 to 34 say they either live with their parents now or moved back in temporarily in recent years,” including 53 percent of those age 18 to 24.

About half of all parents who make funding their kids’ college education a priority have little left for their own retirement, according to a MassMutual study. The study found that only three in 10 parents believe they are adequately funding their own retirement.

Most conventional methods of paying for college come with hidden drawbacks and many strings attached. Traditional college savings plans, like 529 college savings plans, UGMAs (Uniform Gifts to Minors Act) and UTMAs (Uniform Transfers to Minors Act), are typically invested in the stock market and provide no guarantee on growth rate — or even on the return of the principal amount invested. So what’s the solution?

Not all college savings plans come with these kinds of restrictions or drawbacks. Many families have discovered a safe and time-tested savings method called Bank On Yourself. This strategy uses specially designed dividend-paying whole life policies that grow by a guaranteed and pre-set amount ever year. Riders can be added to the policies that supercharge their growth.

This method allows you to know with absolute certainty how much your plan will be worth on the day college starts, plus it holds other advantages too. Because funds are sitting in the cash value account of a whole life insurance policy, they do not count against you in calculations for financial aid. This means that your chances for scholarships and financial aid are greatly increased. Because of the unique features of the Bank on Yourself concept, you may even be able to start funding a college plan when college is only 2-6 years away and still have enough to help pay college tuition.

My husband and I are using this strategy to help save for our two grandchildren’s college education. We started policies designed to maximize the power of the Bank On Yourself concept for each when Jake was 6 and Halle was 3. The plan we set up for Jake will provide about $90,000 for his college education expenses by the time he graduates, based on the current dividends. And Halle’s plan is predicted to provide about $125,000.

Both plans grow by a guaranteed and predictable amount each year and are from a top-rated life insurance company that has paid dividends every year for more than 100 years. If you start early, relatively small monthly contributions can ensure you’ll have a substantial, guaranteed sum of money when it’s time for college.

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