By: Amanda Prischak
Seven out of 10 college students graduated with debt in 2012. For those with loans, the average debt load was $29,400. Meanwhile, many other students had loans that reached high into the six figures.
Those numbers are concerning for recent grads. They can also be troublesome for anyone who cosigns on a student loan. If the unthinkable happens–the student or graduate who took out the loan passes away before it’s paid off–the cosigner is responsible for the outstanding debt.
This is especially true for private loans: While many federal student loans let a borrower’s cosigners complete paperwork releasing them and the estate from the debt, many private student loans do not. What’s more, in community property states like Wisconsin, surviving spouses are often held responsible for a deceased spouse’s outstanding loans.
Without adequate protection, the pain of losing a loved one could be intensified by the financial burden of paying for a dream that ended too soon.
To get an idea of what this could mean for you and your family, read the real-life tales of some families dealing with this unfortunate and costly situation.
Life insurance for student loans
A financial hardship will only make the devastation of losing a loved one that much more stressful and difficult. That’s why life insurance for student loans is something cosigners should consider. A life insurance policy can provide the funds needed to eliminate or reduce a student loan debt in the event the student or graduate passes away before the debt is satisfied.
Term life—a type of life insurance that offers coverage for a specific number of years—is a good choice. Term life is typically the most affordable option. (At Erie Insurance, rates can be as low as $11/month.*) Once in place, the affordable rates will not increase for the length of the plan you choose. Young adults can lock their life insurance rate for as long as 30 years.
There are other benefits to a term life policy. For starters, it guarantees the young adult’s insurability in the future. This means he or she can be guaranteed coverage by converting the term policy to a permanent policy later in life — even if a health condition which normally precludes coverage develops later. **
A permanent life policy lets the young adult accumulate cash savings throughout his or her entire lifetime. Plus, the new premium can be guaranteed for life.
To learn more about the protection and peace of mind life insurance for student loans can offer, talk to a local Erie Insurance Agent. He or she can explain some affordable term life options from Erie Family Life. Some do not even require a physical examination.***
*Rate reflects the best underwriting class available and is subject to underwriting approval. Rounded to the nearest whole dollar.
**The term policy and conversion privilege must be in effect at the time of conversion. Subject to age and plan limitations.
***May require answering health-related questions.