If you’re carrying the heavy burden of student loans, you’re not alone. For many, it’s a constant source of stress-those monthly repayments looming like a dark cloud over every paycheck. It’s even harder when you’re just starting out in your career, trying to make ends meet while building a stable future. Now, if you have a Variable Universal Life (VUL) insurance policy, you may be wondering if it’s wise to withdraw some of your investment gains to finally get ahead of your student debt. It’s a tough call, but for some, it may be the financial relief they desperately need.

Let’s unpack this situation, understand how VUL insurance works, and whether tapping into its investment component can be a smart move for your student loan dilemma.

What Is VUL Insurance, and How Can It Help?

A VUL (Variable Universal Life) insurance policy offers both life insurance protection and an investment component. Over time, as you pay your premiums, a portion of that money goes into a separate fund, which is invested in instruments like stocks, bonds, or mutual funds. Depending on how well your investments perform, this account can grow significantly-making it a potential source of cash when you’re in a pinch.

The unique thing about a VUL is flexibility. Once your policy has accumulated enough cash value, you may be able to withdraw or borrow against it. And for someone burdened by high-interest student loans, this can feel like a lifeline.

The Pressure of Student Loans

Let’s be real. Student loans are overwhelming. Every month, there’s a deduction that eats into your income, often with interest rates that feel predatory. You’re not just paying back what you borrowed; you’re also feeding an interest machine that grows the longer you take to pay it off.

And while some financial advisors will tell you to never touch your insurance investments, they don’t always understand the pressure of day-to-day survival. You’re not trying to buy luxury items-you just want to get out of debt and stop the interest from piling up. That’s a valid and responsible reason to explore your options.

When It Makes Sense to Use Your VUL Investment

Withdrawing from your VUL investment isn’t an automatic “yes,” but under certain conditions, it might be a strategic decision. Here’s when it could make sense:

• Your student loans carry a high interest rate: If your loans are racking up interest faster than your VUL investment is growing, withdrawing funds to pay them off might save you money in the long run.
• You’re in financial distress: If you’re barely keeping up with bills and debt repayments, tapping into your VUL could provide the breathing room you need to avoid defaulting or damaging your credit score.
• You have built up a sizable investment portion: If your VUL policy has accumulated significant gains, using a portion to handle urgent debt like student loans can be a smart way to rebalance your financial life.

Things to Consider Before Making a Withdrawal

That said, there are caveats you should not ignore. Pulling money from your VUL investment isn’t a decision to make lightly. Here’s what you should consider:

1. Don’t Zero Out Your Investment

It might be tempting to wipe out your entire VUL fund to clear your debt, but that could backfire. Remember, this is still an insurance policy meant to support your long-term financial protection. Experts recommend maintaining at least 50% of your investment value. Only withdraw what’s necessary to ease the financial burden-not everything.

2. Impact on Your Policy

Some withdrawals can reduce your death benefit or even increase your premiums to keep the policy active. Be sure to talk to your insurance advisor to understand the terms and impact before making a move.

3. Missed Growth Opportunity

By taking money out of your VUL investment, you’re also removing funds that could have grown over time. It’s an opportunity cost, and you have to weigh it carefully against the savings from eliminating student loan interest.

4. Tax Implications

Depending on how your policy is structured and how much you’ve withdrawn, there might be tax consequences. Withdrawals that exceed the amount you’ve paid in premiums could be taxable as income.

A Balanced Approach: Pay What You Can, Protect What You Have

Financial freedom isn’t about choosing between two bad options. It’s about finding balance. If you’re considering using your VUL to pay off student loans, here’s a more measured strategy:

• Review your student loan terms. Know your interest rates, and identify the most urgent or expensive loans.
• Check your VUL’s current value. Talk to your financial advisor to understand how much you can safely withdraw without compromising your policy.
• Withdraw only what’s necessary. For example, you might just pay off the loan with the highest interest rate, and continue making minimum payments on the rest.
• Plan to replenish. Once your student loan burden eases, consider putting some extra money back into your VUL investment, if your policy allows for it. That way, you’re restoring your long-term savings after solving a short-term crisis.

The Emotional Toll of Debt: Why Relief Matters

Let’s not downplay the mental and emotional toll of being in debt. Every phone notification, every bill reminder-it adds to a constant, nagging anxiety. It keeps you from sleeping peacefully, investing in yourself, or even thinking about the future.

Using your VUL investment to pay off a chunk of your student loan can feel like lifting a massive weight off your shoulders. And if it means protecting your mental health, avoiding default, and finally getting a clean slate, then it might just be worth it.

Final Thoughts

Student loans are real, stressful, and can feel never-ending. If you have a VUL insurance policy with a healthy investment portion, tapping into it can be a lifeline-not a financial failure. But do it wisely. Don’t burn your future to save your present. Use your VUL investment like a tool: carefully, thoughtfully, and with a plan to rebuild what you’ve used.

Remember, your future still matters. Clear your head. Tackle what’s urgent. And when you’re ready, rebuild your investment and keep moving forward.

Because peace of mind is just as important as a healthy bank account.