Cosign a Student Loan? Are you responsible even if the worst happens!
Today's graduates are averaging about $24,000 or more, in student loans coming right out of college. If you are a cosigner on your student's loans, you could still be responsible if G-d forbid something happened to your student! Check your loan provisions to see if this is applicable to your situtaiton. If you signed on to help your student, it might not have occurred to you that these loans have the potential of becoming a significant financial liability to you.
"Unless the terms of the private student loan states that the cosigner will be released upon the death of the borrower, the cosigner is responsible to pay off student loans should the student die."
The simplest solution is to buy a term life policy with guaranteed premiums that are locked in for 10 or more years! It's affordable and gives you some assurance that your financial wellbeing won't be jeopardized.
While buying a term policy protects you from the worst-case scenario, the next question is would it be better to buy your student a permanent life policy?
There are several reasons why this is a good idea: The premium you paid for that term policy will not be recouped. It’s a band-aid to protect you against the worst outcome. It works but...
When you buy a permanent policy, that policy will last the students entire life. The premium rates, while higher than the term, will never be lower because your student is l young and healthy. They will get the lowest rates, preferred plus which will still be in force, even when their 80!
Truth be told, I’m expecting your student to graduate and go on to live a long and productive life and take over the policy payments 10 or 20 years from now. We have a policy for my 19-year-old daughter and someday, I will turn it over to her. The premium amount she will pay will be minimal compared to the cost of buying a policy later when she might not be in the best health.
When you buy a permanent policy, the policy protects your young person, should they develop a chronic or life-threatening illness. Thinking 10 or 20 years out, should they succumb to that illness, you’ll have the funds to care for their dependents, especially if you must assume their care. I know a lot of grandparents that are caring for minor child because the parents aren’t able and of course that means added responsibilities.
Permanent policies include either dividends or cash value that accrue over time. Buying a permanent policy for a 21-year-old that is more than likely to live to 85 means will result in some significant cash value in the policy. What a gift it will be when in 30 years, they realize that this policy will allow them to start a business, secure a business loan, or use the funds to pay for medical or long term care bills. To me, it's an open love letter to them.
Lately, I've talked to too many famlies that have told me, "I NEVER imagined my family would be dealing with a child with cancer, suicide, or in a car accident.” Not trying to dampen the day, but it hurts to watch families going through this without a parachute. Life Insurance is a simple but effective solution. And the good news is, I hope you never have to use the policy!
Don’t put off the purchase of life insurance for yourself or your loved ones. While you may not see the benefit of this financial sacrifice, your family will. While you may not see the benefit of this financial sacrifice, your family will.
Leslie S McMillan is a benefits broker in Rolesville, NC, specializing in the needs of individuals. She is an Elite broker for healthcare.gov, offers Medicare Advantage, Supplements & RX coverage as well as alternative STM catastrophic plans, Life, Long Term Care, Accident, Vision and Dental. As a broker she represents multiple insurance carriers and can help you evaluate the best option for you and your family. She can be reached at 919-271-6898 or at email@example.com