Some families may find life insurance an attractive way to save for college. The advantages of this type of investment are: (1) non-assessment in the EFC calculation at most colleges, (2) tax-deferred growth of earnings, (3) availability of low-interest loans from the policy during college years, (4) potential earnings of variable life policies to keep up with high college inflation rates, (5) forced systematic savings by the family for future college costs, (6) coverage of the future cost of college in the event of death, (7) coverage of future cost of college in the event of disability, if the policy has a disability insurance feature, and (8) possible protection from creditor claims.
The parents reduced their assets by $5,000 by investing in life insurance for college. Since the parents assets were assessed at 5.6% the asset reduction may increase the childs financial aid eligibility by $280 ($5,000 x 5.6%).
If you are in a financial aid asset assessment rate of 5.6%, you could increase your financial aid eligibility up to $56 for every $1,000 of asset reduction by investing in life insurance for college.