SmartMoney Blogs

Ask SmartMoney
Your personal finance questions, answered.

Insurance-Based College Savings or 529s?

Question: How do insurance-based college-savings programs compare with 529 plans? And do they count in the federal financial aid calculation?

— Thomas Kaye, New York City

Answer: With university costs up 5.6 percent this year, it pays to explore your options. Insurance-based college plans—such as variable life insurance policies that include a tax-deferred investment account—have some advantages over 529s: You can spend the money on things other than education, and life insurance plans generally have no impact on your eligibility for federal financial aid. (The exception: Individual private schools might take those policies into account, says Deborah Fox, a San Diego–based financial adviser specializing in college planning.) But between fees and other expenses, insurance policies are generally costlier than 529s and have far less flexibility when it comes to investment choices.

For More Information:

Send questions to Please include your name and address.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (0)

    • Be the first to leave a comment on this blog.

About Ask SmartMoney

  • Ask SmartMoney has a single, simple mission: Answer your questions. Answers are written by the staff of and SmartMoney magazine, with the help of outside experts. Topics cover investing, spending, retirement planning, saving for college, insurance, taxes and more. Submit your question in the form below, or email