Student Loan Debts: Yet Another Use For Life Insurance
If you have ever decided to cosign on a student loan for your child, then you’re well aware of the heavy responsibility that goes along with such an action. Should your child be unable to pay, then the creditors can come after you. No big deal, you might think. My child will just make the payment or else, or they’ll pay me back whenever they can.
But what happens when the WORST happens?
What if your child were to die while in the process of repaying that debt? It isn’t something that anyone wants to think about, especially those of you with children, but at the same time, you do yourself and your family a disservice if you don’t prepare for every possibility.
In this type of case, having a life insurance policy in place on your child is the best course of action.
According to CNN, a basic plan of up to $250,000 can “cost as little as $15 per month.” That’s a small price to pay considering that most students graduate college with an average of more than $25,000 in student loan debt. If your child attends a prestigious school under zero or limited scholarship, then the price tag can climb clear into the six figures.
In the CNN story alluded to above, Steve and Darnelle Mason were left holding the bag on a $100,000 loan they’d cosigned on for daughter Lisa, who died of liver failure at the age of 27.
“I absolutely wish we had [a life insurance] policy,” Steve confessed. “We would not have struggled financially for the past four years with these private student loans, and our credit would not have been ruined.”
Jennifer Boughan, a 47-year-old mom of three, learned from that example, purchasing three individual life insurance policies for her daughters when they enrolled in college. Boughan pays out about $150 per year for each policy, which offers coverage of $100,000. Each daughter will accrue between $50,000 and $60,000 in student loan monies from both private and federal sources combined. Boughan’s policies would also help cover funeral arrangements and any remaining debts the girls might have in such an unfortunate scenario.
“These policies are in case — and God forbid — the worst that could happen, does,” said Boughan. “Seems to me that is a far better expense than to have to face the devastation of what comes after the tragedy of a lost child.”
If you are considering a life insurance policy to help safeguard against such a situation, make sure that the amount is for at least as much as the student loan debt. Again, you might want to do the full amount of debt that your child owes insofar as what you’ve cosigned for. Furthermore, leave cushion to make up for burial/cremation expenses as well as any lost wages in case your job doesn’t have a bereavement policy.
The death of a child is a painful thing and something that no one in their right mind would ever want to go through. But it does happen, and even though it causes a lot of pain and grief when it occurs, that doesn’t mean you can or should give up. After all, you may have a spouse and/or other children, who depend on you for stability and support. A life insurance policy won’t take away the anguish but it can help you deal with the fallout and reclaim a measure of strength and perseverance in the long run.