Student Loans

Why are student loans a concern?

The total U.S. student debt (as of 2016) now makes up $1.45 trillion of all consumer debt. To make matters worse, over 20% of student loans are private.

There is a huge disadvantage that private student loans have that federal loans do not have. Federal loans offer protection if a student passes away. On death, the debt is forgiven and completely discharged. Private student loans do not offer this protection.

What happens with a private loan?

Many students with private loans are only able to get a loan approval by having a cosigner. The cosigner, usually a parent or grandparent, agrees to repay the debt if the student can’t. Therefore, if a student passes away, the cosigner is left to repay the debt.

Today, the average size of a student loan is well over $37,000 – and the average payment is $350 a month! That can be a hefty, long-term burden for a parent or grandparent.

What’s the best way to protect my cosigner?

Leaving a student loan burden on your cosigner can be a big deal, especially if they can’t afford to pay the loan. The best way to protect your cosigner is to make sure your life insurance beneficiary designation plan includes them as a beneficiary. Conducting a life needs assessment on a bi-yearly basis is something all adults should be doing, regardless of age. A life needs assessment does three things:

  1. Determines an adult’s life liability – what do relatives and/or dependents have to lose if you pass away?
  2. Determines an appropriate product and coverage amount, based on your budget.
  3. Determines how to divide the proceeds when you pass away.

As a cosigner, can I protect myself?

If you are a parent or grandparent that cosigned for a private loan, you can simplify things by purchasing a life insurance policy equal to the debt value of the student’s private loan(s). An easy solution is to use a simplified term policy. This type of policy generally covers up to $99,999 without a medical exam. You can insure the student, pay for the policy, and select a term up to 30 years.

To learn more about protecting yourself, please visit our Scheduling Page to make an appointment with an insurance professional. We would be happy to help!