‘A Better Rate Than a Student Loan’: Clark Howard Tells Texas Dad Where His College Money Is Hiding

A Texas father called into The Clark Howard Podcast on September 23, 2026 with a familiar question: his son is starting junior year of high school with around $6,300 in a Capital One savings account earning 3%. The family has a whole life insurance policy funded since the boy was one or two years old. Can it pay for college?

Clark Howard’s answer: “Borrowing against the life insurance policy. Whole life policy purchased when your child was very young, yes. You’ll be able to borrow against it at a better rate than a student loan. Almost certainly.” He added the caveat: “It will have to be a very affordable college, though, for the numbers you’re talking about to be enough to have a dent in the overall cost of college.”

Why the Cheapest Lender in the House Is the Policy Cabinet

Howard is right. The Federal Reserve’s target rate upper bound sits at 4%. The FDIC national average yield on a 12-month CD was 2%. Earlier in the episode, another caller described two graduating students each carrying roughly $200,000 in loans at 9% fixed interest.

A 15- or 16-year-old whole life policy typically charges a loan rate in the mid-single digits against its cash value, a contractual rate written into the policy years ago. When federal Grad PLUS and private undergraduate loans are priced near 9%, and when Howard has said “Student loans are cost prohibitive now under the rule changes that Congress put through. The interest rates, the borrowing, astronomically expensive”, the policy becomes the cheapest lender in the room.

What a Policy Loan Actually Costs

Howard’s advice is correct on rate but incomplete on mechanics. A whole life policy loan is not free money against your own savings. Three things happen when the check clears.

1. Interest accrues. Say the son borrows $10,000 at a 6% policy loan rate. Unpaid interest compounds against the cash value. Left alone for four years, that $10,000 becomes a materially larger obligation, with no monthly bill to remind you.
2. The death benefit shrinks. An unpaid loan balance, plus accrued interest, is subtracted from any death benefit paid to beneficiaries.
3. The policy can lapse. If the loan plus accrued interest exceeds the cash value, coverage terminates. The IRS treats the forgiven loan amount above the premiums paid as ordinary income.

If cash value in a 15-year policy sits in the low five figures, a policy loan can cover part of a semester at a commuter school. It cannot cover four years at an out-of-state flagship. That is what Howard meant by “a very affordable college.”

Sticker Price Flips the Answer

At a Texas public university where the son commutes and works part time, a $10,000 to $15,000 policy loan at roughly 6% is meaningfully cheaper than the same balance in federal or private student debt near 9%.

At a $70,000-a-year private college, the policy loan is a rounding error that leaves the family with six figures of high-rate debt anyway, and now a compromised insurance policy on top. In that scenario, Howard’s own broader guidance applies: “Just pay off the loans, keep it simple.”

The $6,300 in the Capital One account, by the way, is already earning more than the 2% national CD average. Moving it into a 529 in the junior year of high school buys the Texas family no state income tax deduction (Texas has no state income tax) and lands the money in what Howard describes as a conservative enrollment-year portfolio that behaves like a savings account anyway. The 529 move here is a wash.

What to Do Before Writing a Tuition Check

1. Call the insurer for current cash value, the exact policy loan interest rate, and the projected balance after four years of unpaid interest.
2. Price total cost of attendance at two or three in-state Texas public options, including community college transfer paths.
3. Pull the 2026-27 federal student loan rate sheet from studentaid.gov and price the gap in Direct Subsidized and Unsubsidized loans. Federal loans carry deferment, income-driven repayment, and discharge protections a policy loan does not.
4. Keep the $6,300 in the Capital One account. A 3% yield on cash the family will spend within 24 months is doing its job.
5. If the policy loan is used, set a written repayment schedule the day the money is drawn.

Howard’s rate math is right. The cheapest debt in this household really is the one written into a policy purchased when a toddler was learning to walk. Whether that makes it the right debt depends entirely on the sticker price of the school on the acceptance letter.

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