The Importance of Life Insurance for Student Loan Co-Signers
Having to bury a child is the toughest thing a parent could ever face. No parent ever wants to have to think about the possibility of outliving their child. Unfortunately, it is a prospect that you should at least consider if you’re planning on co-signing for your child’s private student loan. Otherwise, if the worst happens and your child does pass away, you could be facing serious financial trouble in addition to your unimaginable tragedy.
When you co-sign for a loan, you automatically assume the financial responsibility for paying back the loan should the person that borrowed the money pass away. Luckily, this generally isn’t a problem with federal student loans as these typically include a death discharge clause that automatically cancels the remaining debt should the borrower pass away. However, you usually won’t be so lucky when you co-sign on your child’s private student loan as the lender will generally require you to cover the remaining portion of the debt.
When this happens, you’ll be left struggling to pick up the pieces both emotionally and financially. This is exactly why most financial experts recommend taking out a life insurance policy on your child prior to co-signing for their loan. The life insurance policy will obviously make it easier for you to cover the costs of the funeral bill and any outstanding medical expenses, but it can also come in handy by providing you with the funds needed to pay off any remaining debt on your child’s student loans.
The rising cost of tuition means that most students are forced to take out private loans in order to cover the cost of their education. The only problem is that more than 90% of all private student loans require a co-signer, which means that co-signing for your child’s student loan might be the only way that they can get the necessary funds to attend college or university.
As a parent, you obviously want to provide your children with every possible opportunity. This is exactly why so many parents end up co-signing on their child’s student loans. Unfortunately, there is very little benefit in being a co-signer other than the satisfaction of seeing your child go to college. On the other hand, co-signing for a loan comes with a huge amount of financial risk since you will be left on the hook for the debt should your child pass away or be otherwise unable to repay their loan.
Protecting Your Financial Future with Life Insurance
Many parents are hesitant to take out life insurance policies on their children for the simple fact that they don’t want to consider the possibility that their child might die before them. However, this really isn’t a luxury that you have if you plan on co-signing for your child’s student loan. If your child needed to take out a student loan in the first place, the odds are fairly good that you don’t have unlimited funds. This means that you could end up getting into huge financial difficulties should your child pass away and you be forced to repay their student debt.
Choosing a Life Insurance Policy
Not all life insurance policies are equal, which means you’ll need to do some research to find one that works for your specific needs and situation. The most important thing to pay attention to is the total amount of death benefits as you’ll obviously want to make sure that the life insurance policy will fully cover any outstanding student debt in addition to paying for the funeral and other related expenses. This means that if you are co-signing on a $50,000 student loan for your child, you need to ensure that the life insurance policy covers all this amount and more.
The death of a child is something that every parent hopes that they never experience. Having a child pass away before you will obviously have huge consequences for your life, but these consequences can become even more major when you’ve co-signed on your child’s student loan. In this case, the best thing you can do is to ensure that you’re protected financially by taking out a life insurance policy on your child before signing for their loan.