Is The Gerber Life College Plan A Good Alternative to 529 Plans?

Dan and Dorothy Gerber started selling baby food in 1927. Forty years later, Gerber’s started selling life insurance … promoting it as a way to save money to put Baby through college.

It’s true: Using the right kind of life insurance can be an excellent savings strategy. Check out the book The Bank On Yourself Revolution, the New York Times best-seller about the best way to use life insurance as the foundation of your family’s wealth-generating strategy.

But the kind of life insurance Gerber uses in its cookie-cutter one-strategy-for-all-people is not an efficient way to save money – or buy life insurance.

What Exactly Is the Gerber College Savings Plan?

The Gerber College Savings Plan is a type of life insurance for adults called “return of premium term life insurance.” The policy matures in 10 to 20 years, typically at the time the child is expected to start college. The payout at maturity is the total of all premiums paid, plus a small amount of interest. The payout is guaranteed by Gerber Life Insurance Company, so families know from the start the amount they will receive at the end of the term. If the insured individual dies prematurely, the payout is made upon the insured’s death.

How Gerber Uses Life Insurance to Help Families Save for College

Gerber puts a term life insurance policy on one of the parents. It includes an expensive feature that causes the policy to pay off whether the insured person lives or dies. Without this feature, if the insured person didn’t die during the term, the term policy would simply expire – evaporate – at the end of the term, and all the premiums paid would just go to increase the insurance company’s profits.

As a parent or grandparent of a child who will presumably attend college someday, Gerber says you only need to do four things:

  1. Tell Gerber Life Insurance Company how much money you want to have for college.
  2. Tell them when you want to have the money – anywhere from 10 to 20 years from now.
  3. Decide who’s going to be insured. Generally, you’ll want to insure whoever will be making the monthly payments, since the policy will pay off if the insured person dies. And no, even though it would be much, much cheaper to insure the child instead of the parent or grandparent, Gerber won’t let you do that.
  4. Come up with a premium payment every month that’s rather exorbitant for the value you’ll receive, as you’ll understand in a minute.

At the end of the agreed-upon term, Gerber Life Insurance Company will send you a check for the payout you specified. If the person who is insured passes away before the payout is due, they’ll send the payout to the beneficiary without waiting for the scheduled payout date.

At the time the money is paid out, the policy ends. You don’t owe any more money, and Gerber washes their hands of any responsibility to provide further life insurance protection for you under the policy.

Three Unpleasant Surprises You’ll Face with the Gerber College Plan

Surprise #1! The scheduled payout from your Gerber College Plan is only slightly more than your total premium payments!

Here’s an example from a Gerber Life Insurance Company representative we spoke to. Let’s say a 28-year-old father in good health wants to have $25,000 for his seven-year-old daughter when she starts college in 11 years.

Now, according to the Education Data Initiative, the average cost of college tuition and fees in 2023 is $37,641 at private institutions, $9,377 for state residents at public colleges, and $27,023 for out-of-state residents attending public universities. That’s just for one year.

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

We respect your email privacy

What will college cost in the future? The average cost of college has more than doubled in the 21st century, growing by 7.1% per year, which is faster than the average increase in personal incomes.

In any case, $25,000 isn’t going to do a whole lot to help the little girl in our example get through four years (or more!) of college. But Gerber doesn’t mention that.

So, our hero in this example, the Dad, takes out a $25,000 Gerber College Fund life insurance policy on himself, and he plans to mail his premium monthly. Dad will need to pay $184.82 every month for 11 years, until his daughter is 18. Then he will receive a $25,000 payout he can use to help cover her college expenses – or for anything else.

Let’s do the math: Dad will have made premium payments totaling $24,396 ($184.82 per month for 11 years = $24,396). The payout will be $25,000. But that’s a gain of only $604! … And that’s an annual growth rate of just over … umm … 0.0%.

You’d do better in a savings account or an online savings bank. (Of course, a bank will not pay a death benefit if the insured passes away prematurely.)

Get Your FREE Report!

Get instant access to the FREE 18-page Special Report that reveals how super-charged dividend paying whole life insurance lets you bypass Wall Street, fire your banker, and take control of your financial future.

We respect your email privacy

Surprise #2! Your earnings from the Gerber College Fund are taxable!

You’ll pay income tax on every penny you receive as a scheduled payout, beyond the amount you paid in premiums. However, since the amount of money you’ll earn is very small, you won’t be paying much in taxes. You decide if that’s a good thing or a bad thing.

Surprise #3! Your Gerber College Plan could very well cost your child much of their student aid!

If you fill out your child’s application for student aid while you have your Gerber College Fund payout sitting in your bank account, your student’s eligibility for aid will be drastically reduced, according to …

The Gerber Life College Plan [is] a form of life insurance, which is not reported as an asset on the Free Application for Federal Student Aid (FAFSA). However, the full plan payout amount may need to be reported as income on the FAFSA, reducing eligibility for need-based financial aid by as much as half of the distribution amount.”

So, the dad in our example would grow his money by $600, while his now-college-age daughter could lose up to $12,500 in student aid!

What About a 529 Plan as an Alternative to a Gerber College Plan?

If you tell your financial or investment advisor you want to start a college fund for your child or grandchild, you’ll likely be told about the wondrous virtues of a 529 Plan (named after Section 529 of the US Internal Revenue Code, “Qualified Tuition Programs”).

You sign up for a 529 account on behalf of your child or grandchild. You put in after-tax dollars, but you don’t have to pay federal income tax on money you take out – if you use it for qualified college expenses. Sound good?

There Are at Least Four Serious Problems with 529 Qualified Tuition Programs

1. You have a limited number of investment choices with a 529 plan

If you were investing in the stock market yourself, you could choose from literally thousands of stocks, bonds, mutual funds, and exchange-traded funds. But with a 529 plan, you’re limited to the few options the plan manager has decided to offer.

2. You can only make investment changes once each year

Warning! Because you can only change your investment strategy once a year with a 529 plan, you have no way to react quickly to changes in the market. This could leave you tearing your hair out if the fund you invested in begins to tank.

For example, a Southern California mom opened a 529 plan for her young son, and it was a fiasco. She put $15,000 into the plan – which proceeded to drop 40% in less than a year. There was nothing she could do to stop the bleeding until the year had passed.

Her reaction? …

It was heartbreaking to watch. The 529 plan is sold to parents as the no-hassle investing fund. … I honestly thought we had done such a good job upfront that we could relax.”

3. 529 Plans have two – maybe three – or even four – layers of fees!

You’ll pay at least two layers of fees, for sure. The 529 administrator gets one fee, and the manager of each underlying mutual fund also gets a fee. If you buy your plan through a stockbroker, you’ll also pay your broker a fee. And many plans also charge an annual fee.

4. Your 529 Plan may cost your child financial aid!

When your child applies for college, the college will count your 529 payout as your asset when it comes to figuring out how “poor” you are for financial aid purposes. The money you save in a 529 plan counts against you when colleges calculate the family’s expected financial contribution.

Your child may need financial aid, but your 529 Plan could very well keep him or her from qualifying for it.

Is There a Strategy that Beats the Socks off 529 Plans and Runs Circles Around the Gerber College Fund?

Yes, there is. It’s a strategy that wise families have used for decades, to build cash safely and with competitive growth. We call that strategy Bank On Yourself.

Like the Gerber College Plan, Bank On Yourself is built on the concept of using life insurance as a savings vehicle.

But that’s where the similarities stop.

Why Bank On Yourself Is Best for Saving for College

The Bank On Yourself strategy is ideal for saving for college. You’ll have guaranteed growth that will leave the Gerber baby sitting by the side of the road, crying for her mama. Plus, you’ll have even greater growth each year your Bank On Yourself-type policy pays dividends – and dividends, while not guaranteed, have been paid every single year for more than a century by the life insurance companies preferred by the Bank On Yourself Professionals.

A Bank On Yourself-type plan won’t evaporate the day your child starts college. You can even use it to augment your retirement income later on.

The Bank On Yourself strategy uses whole life insurance.

But more than simply using whole life insurance, the Bank On Yourself strategy structures the policy so that its cash value grows up to 40 times faster than the cash value of typical whole life insurance, particularly in the early years – like when you’re saving for college!

With the Bank On Yourself strategy, your cash in the policy won’t be counted against your family when the college parcels out student aid. Having that one feature alone would make the Gerber baby gurgle with glee. …

With a Bank On Yourself-type policy there’s more!

Read about the five tax advantages of the Bank On Yourself strategy that leave the Gerber baby wondering if her Uncle Sam even likes her.

Learn more about the Bank On Yourself college funding alternative – and see an actual Bank On Yourself case study – one that will not leave the Gerber baby still paying on her school loans when she’s 60!

And here’s a quick five-minute video on how to use Bank On Yourself to help pay for college.

Let’s See How a 529 Plan, the Gerber Life College Plan, and Bank On Yourself Compare:

Plan Feature
529 Plan
Gerber Life
College Plan
on Yourself
Accumulation Vehicle Market Investments Term Life Insurance with Return of Premium Feature High Cash Value Dividend-Paying Whole Life Insurance
Can I avoid having the money count against us for student aid? No Not once payout has been made Yes
Can I use my money for non-education purposes? No Yes Yes
Can I continue the strategy beyond college? No Yes Yes
Are there tax benefits? Maybe No Yes
Will the fund self-complete if I pass away? No Yes Yes
Is the growth of my money guaranteed? No Yes Yes
Will my money grow at competitive rates? With market volatility, it’s impossible to know in advance No Yes
Is the strategy flexible enough to be used for retirement savings as well as college? No No Yes
Does the strategy include life insurance protection that can continue for my entire life? No No Yes


With both a 529 Plan and a Gerber College Plan you’re missing a whole slew of features that come standard with Bank On Yourself!

What a choice to have to make!

Will you settle for a 529 plan – a strategy that could lose some or all the money you’re counting on, due to market volatility? …

Or would you rather put your money in a Gerber College Plan – a strategy with growth that’s barely more than if you stashed the money under your mattress, and that ends when you take the payout? …

OR …

Do you want the one strategy that has Yes in every column – a Bank On Yourself-type policy based on whole life insurance – the kind with more guarantees than any other kind of life insurance?

More Information on Alternatives to 529 Plans and the Gerber Life College Insurance

If you’re serious about saving for college, you’ll want to be sure to read our article about 529 Plan Alternatives.

Gerber Life Offers Other Types of Life Insurance, Too

Gerber built their reputation by selling strained plums and smashed carrots – baby food. While many life insurance companies around the world trace their existence and experience back to the early 1700s, Gerber didn’t enter the market until 1967, making them the baby. (Sorry … couldn’t resist that one.)

Gerber’s life insurance division offers only a limited selection of policies in addition to their highly-promoted College Savings Plan. The well-advertised Gerber Life Grow-Up Plan offers small whole life insurance policies for children and teens. Gerber also sells term and whole life policies with rather low coverage limits for adults, guaranteed issue plans with extremely low coverage limits for seniors, and accidental death and dismemberment insurance.

The Choice Is Clear: Only Bank On Yourself Offers You the Guaranteed Wealth-Building Strategy that Works with You and Grows for You … For Your Entire Life

To learn more about using the Bank On Yourself strategy to save for college (for yourself or someone you love), grab your copy of our FREE Special Report, 5 Simple Steps to Bypass Wall Street, Beat the Banks at Their Own Game and Take Control of Your Financial Future. Be especially sure to read the section on “How to Pay for College Without Going Broke, Saddling Your Kids with a Lifetime of Debt, or Sacrificing Your Retirement!”

Then, to see what the Bank On Yourself strategy could do specifically for you and your family, request a free analysis of your personal situation. When you request a FREE Analysis, you’ll get a referral to one of only 200 financial representatives in the US and Canada who have met the rigorous training and requirements to be Bank On Yourself Professionals. The Professional will look at your overall financial picture and recommend a way to put the compound growth of dividend-paying whole life insurance to work for you – for college funding and for a retirement income you can predict and count on.