Are you a student approaching graduation with outstanding loans?
Or perhaps you have a family member that is looking forward to graduating?
If you have signed for a student loan, you will want to read this!
Whether you are the student or cosigner, loans can pose potential problems if you are not prepared.
Life insurance for student loans helps make sure that you don’t find yourself overwhelmed by debt when you are faced with the unexpected.
Why You Should Consider Life Insurance For Student Loans
No one wants to think about possible tragedies occurring, especially during such happy, hopeful times.
College graduation is an exciting time …not only for the student but for the family members and loved ones who have supported them during their journey.
Student loans are usually considered to be an optimistic investment.
While the expense of college can be taxing, loans make it possible for anyone to pay for an education.
The promise of a bright future outweighs the negatives.
Once the student graduates, they will be able to find a job that will enable them to pay back the debt.
At least that is the belief of most people who use loans to fund higher education.
The last thing on your mind is losing your life or your loved one before the loan is repaid.
When tragedy strikes families are in financial crisis
In recent years, families have been fighting to pay back extreme college loans owed after the death of a family member.
One pastor and his wife owed approximately $200,000 after their daughter died from liver failure.
They received donations to help pay down the enormous debt after CNN featured their story in 2014.
Some of the lenders also contacted them and agreed to make arrangements, which came as a relief to the parents who had been considering bankruptcy.
However, the success that this family had in reducing what they owed on behalf of their daughter, is uncommon.
Most grieving families must cope with the heavy burden of student loan debt on top of the tragic death of their loved one.
Why life insurance for student loans is smart for families
Life insurance for student loans covers the student’s debt and any cosigners in the unfortunate event of death.
While the scenario is probably far from your mind, and, in most cases, unlikely, it still should be planned for.
In the horrific event that you must deal with the death of your student, the last thing that you would want is to have it compounded by loads of debt that you can’t pay.
In the instance above where the parents were left with their daughter’s college debt, even bankruptcy would not have been likely to save them.
Bankruptcy rarely dismisses student loans according to CNN.
It may seem unreasonable to grieving families, but filing bankruptcy probably won’t help their financial problems.
Weighing the cost
Another consideration for families of college students is the cost of life insurance for student loans.
When you have a family member in college, expenses can be tight.
You definitely don’t want to waste a dime.
It can be easy to blow off life insurance for student loans as an unnecessary expenditure.
But, most students are in their twenties or thirties.
Life insurance in this age bracket tends to be inexpensive and easily attainable.
Chances are it won’t be out of your price range to come up with the premium required to pay for the policy.
And it won’t be anywhere close to what you would be accountable for if you had to pay the loan’s balance.
“Because it’s cheap, and the penalty is both emotionally and financially devastating, there’s no good reason not to do it,” advises Weisbart, of the Insurance Information Institute.
Cosigners aren’t the only ones at risk
While this may come as a surprise to some, almost no one realizes that this does not cover all of the risks involved in college loans.
The family and the student might be most shocked to learn that the cosigner is not the only one who could be left holding the bag.
Should something happen to the cosigner, then the student may be responsible for paying back the debt immediately.
This means that in the event that a parent who has cosigned passes away, even the recently graduated might face an impossible debt to pay.
For the young college student, death can seem like a distant possibility.
But, once you consider the possibility of parents and grandparents passing, the chances don’t seem as completely out of one’s imagination.
Federal versus private loans:
Often times federal loans do not have the same stipulation upon death as private loans.
However, federal loans do not often require a cosigner, either.
But federal loans do come with their on risks.
For example, you would still be responsible for any taxes on federal loans that are forgiven if they total more than $600.
The tax burden can create a hefty financial problem for families.
Private loans, on the other hand, are likely to allow cosigners and require repayment if tragedy should strike.
According to one report, in 2011 almost 90% of private loans were cosigned.
Many families rely on a combination of federal and private loans to pay for college.
If you are one of the families who has depended on a private loan, you should know all of the information surrounding your repayment schedule.
You might be surprised to learn the truth behind the fine print.
Hopefully, you will never find yourself in a situation where you would need life insurance for student loans.
But like most tragic life experiences, if you are not prepared, the loss can hit you even harder.
With a small investment, you can be sure that if you have to deal with the death of a loved one, you won’t have to worry about finances on top of it.
Your insurance agent can help you decide which policy is best for your family.
You can have the peace of mind that comes with being able to afford even the worse circumstances that might arise.