There are many reasons why people consider life insurance, including student debt. In 2016, the average college student graduated with $37,172 owed in school loans. Once you factor in interest, the payments average over $200 a month. College loans can be overwhelming to recent graduates, but can be even more overwhelming to their families if the unthinkable happens and they pass away while still owing money.
While it may be unpleasant to think about, the reality is that student loan debt on private loans can be passed on to the co-signer in the case of a student’s death.
Here are some things to know:
-With federal loans, debt is absolved when the owner passes away. Parents and spouses are not responsible for any payment.
-With private loans, if the owner passes away and there is no co-signer, the lender will use money from the student’s estate to pay off the balance. If there is not enough money to pay off the debt in the student’s estate, the loan will most likely be discharged. If there is a co-signer on the loan, he or she can be held responsible for the debt.
Every situation is different, so if you are consider co-signing on a son’s/daughter’s/friend’s school loan, ask about the repayment terms. Some lenders have programs to forgive the debt, and others do not. Be prepared for the unexpected and consider taking out a life insurance policy for the loan holder. There are different life insurance options to suit your needs, ones that are for a set amount of time, and ones that are longer. Contact Joe Soares our Certified Insurance Counselor to find out what life insurance options would work best for you.