Many of us wait with bated breath to learn if we are accepted to the college of our choice. If we do make it in, then the financial juggling begins.
College is so expensive now that many students have to take out student loans. If federal student loans aren’t enough, students increasingly turn to private student loans. Often, they need a co-signer to qualify, and that co-singer is typically their parent.
While parents often take a risk by co-signing for their child, many are happy to do it. However, how many of them realize that if their child dies, they will still need to repay the loan they co-signed for? My guess is that not many students or parents realize this.
The Minimum Amount of Life Insurance You Need
If you are the student who has taken out private student loans that your parents have co-signed for, be responsible and take out a life insurance policy to cover the full amount of your co-signed loans to be repaid and your funeral expenses, at a minimum.
Of course, college grads don’t often die within 10 years of graduation, thankfully, but it does happen. Protect your parents by getting a life insurance policy. If you died unexpectedly, the last thing they would want to worry about is repaying your loan.
Can You Afford Life Insurance If Your Money Is Tight?
Money can be tight after graduation. I get it. However, take a look at a tool like Genworth’s Life Insurance Calculator which can help you determine your life insurance expenses.
If you are young and healthy, you will likely be surprised how low a term-life premium is per month. If you are still not sure you can afford a term-life insurance policy, consider organizing your finances so that you can. USA Today recently had an excellent post, Life Stages: First Job, First Paycheck and First Budget, which seeks to help college graduates prioritize their saving, spending, and budgeting goals. If you don’t know where to start, this is an excellent resource.
Still not sure you need life insurance to protect your co-signers? Consider the case of 61 year old Ella Edwards who co-signed private student loans for her son. He passed away at the age of 24. Now, three years after his death, Edwards still owes $10,000 on the loans. Edwards would like to think about retiring, but she can’t until her son’s student loans are paid off.
I am sure her son never meant to saddle his mother with loan payments years after his death, but that is what happened. Now, she is sharing her story so others don’t end up in the same situation.
Guest Post by Melissa