What is the best way to save for college tuition?

The best approach combines multiple savings vehicles — 529 plans for tax-advantaged growth, Coverdell ESAs for broader investment options, and custodial accounts (UGMA/UTMA) for flexibility. FLG's Tuition Arbitrage strategy layers these tools together with cash-value life insurance to maximize savings while minimizing student loan dependence.

What is a 529 college savings plan and is it worth it?

A 529 plan is a tax-advantaged investment account designed specifically for education expenses. Contributions grow tax-free and qualified withdrawals for tuition, room and board, books, and fees are not taxed at the federal level. For most families, 529 plans are among the most effective college savings tools available, particularly when opened early.

What is the difference between a 529 plan and a UTMA account?

A 529 plan offers tax-free growth but restricts qualified withdrawals to education expenses. A UTMA custodial account has no usage restrictions — funds can be used for any purpose once the child reaches legal age. UTMA accounts lack the tax advantages of 529 plans and are assessed at a 20% rate under FAFSA versus 5.64% for parent-owned 529 plans, which can meaningfully reduce financial aid eligibility.

Can you use life insurance to pay for college?

Yes. Cash-value life insurance policies such as indexed universal life insurance build cash value that can be borrowed against tax-free to pay for college. IUL policy loans are not counted as income or assets on the FAFSA, preserving financial aid eligibility while providing a flexible, tax-efficient funding source.

What is Tuition Arbitrage?

Tuition Arbitrage is FLG's proprietary strategic framework for college savings that combines 529 plans, Coverdell ESAs, custodial accounts, and cash-value life insurance into a coordinated, layered savings system. The goal is to reduce or eliminate student loan dependence by maximizing tax advantages and growth potential across multiple account types simultaneously — while protecting retirement savings and minimizing financial aid impact.

How much should I save for my child's college education?

A practical benchmark: aim to cover one-third of projected costs through dedicated savings, one-third through current income during the college years, and one-third through financial aid or scholarships. Starting early and using tax-advantaged accounts significantly increases the achievable savings rate. FLG advisors can build specific projections based on your child's age, target school type, and current savings rate.

Tuition Planner: College Savings Strategies That Work | FLG

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Tuition Planner: College Savings Strategies That Work | FLG | Financial Literacy Group