If you were to have a conversation with your children or grandchildren about planning for education expenses, what stands out as the most important thing? Would it be about acquiring prepaid tuition credits, because they are certain where they will spend those pivotal years after high school? Would it be about the flexibility to choose between a traditional college experience or an accelerated degree program? Would it be about the ability to choose the option to enter a trade school or maybe even take some time before starting a higher education path to figure out exactly what they want to do? The college experience is simply not was it was when most of you were attending - and it continues to evolve. When beginning your conversations about planning for higher education expenses, it is crucial to identify the most important aspects of your child or grandchild’s unique situation.
Once their priorities have been identified, the next step when planning for any type of education expense is determining how long until you will need to access the funds. This will help narrow down the different types of investment vehicles to consider. Another important factor to bear in mind is how their financial aid eligibility will be affected by the investment vehicle. That is not a consideration you hear of very often, but it is a variable that should be considered. This is no different than making any other financial decision - it is best to do ample research and seek professional guidance to make sure you understand what is available.
Over the years, we have used many different tools to help families plan for higher education expenses. And there are two things that we know to be true: modes of education continue to evolve and no two situations are the same. The one tool we would like to address here, for use in the appropriate circumstances, is a ‘cash value life insurance policy.’ You might be wondering “Really? Life Insurance?” So let’s take a look.
When we evaluate assets, we like to focus on what they are for opposed to what they are. We know a cash value life policy can provide coverage for the unexpected and they offer a tax friendly way to accumulate and use assets for education expenses. Now here is the exciting part, according to FinAid.org: “…the value of the policy is sheltered from financial aid need analysis formulas.” This is significant when you file a Free Application for Federal Student Aid (FAFSA) to apply for grants, scholarships, or when being considered for an on-campus work study position.
For anyone planning to attend college for the 2018-2019 academic year, the first available FAFSA file date is October 1st of this year. For those attending college in the 2017-2018 academic year, the filing window was open October 1, 2016 and will close June 30, 2018. As you can see, it is vital to plan ahead in order to avoid those deadlines.
Having the conversations about education are important… and never too early. Though many students do not desire the traditional college path, the very first step is identifying the most important thing about education and education expenses to you and your children or grandchildren. By starting early and utilizing the various tools available to your individual situation, we can help ensure that the right education environment is obtainable for the family you love.