No parent wants to think about losing a child, but sometimes the unthinkable happens. When that child is a college student with a loan you cosigned, along with the grief you’ll suffer, you could also be saddled with crushing debt. A simple life insurance policy could provide peace of mind and the wherewithal to pay off that student loan.
According to USNews.com, in 2013, graduating seniors left school with an average student loan debt of $28,400. However, the article noted that figure may not have included private loans, which accounts for nearly 20% of all graduating seniors’ debt.
Federal loans are discharged after the death of the borrower. The same is not true for private loans, 90% of which are cosigned, according to Consumer Financial Protection Bureau. In that event, discharging the debt is at the discretion of the individual lender. Private lenders are not found by any federal requirements to help, although the co-signer might be able to negotiate a reduced balance, lower interest rates and smaller monthly payments.
Before you co-sign that private college loan for your child, shop around for an insurance policy that makes you the beneficiary. Since college students are typically in their late teens or 20s, the premiums on a life insurance policy will be relatively inexpensive, particularly a simple term life policy. Your goal here isn’t an investment vehicle like that offered by a more costly whole life policy. You simply want to find the lowest possible price on a policy that will protect your finances. When deciding on an amount, don’t neglect to factor in any non-student loan-related debt you may have incurred to assist with college costs such as credit cards, home equity loans and 401K loans, as well the money you’ll need to meet final expenses.