Student loan debt has been skyrocketing for quite some time now.
No matter which field of education the student belongs to, or the level of education one is subscribing to (under grad or grad school), the student loan debt always seems to be at its bursting point. Last year the total debt amount generated by student loans climbed up to the second position in the chart of consumer debts, right below home mortgages and its total value was that of $1 trillion. The year before that, as per a survey’s report to U.S NEWS 68 % of students shouldered student loan debt at graduation.
These are not any small loans which can be taken care of lightly, therefore once college gets over the repayment of this gargantuan debt becomes one of the topmost financial priorities for students, and all other forms of financial security plans like a retirement fund or insurance schemes take a back seat. However, a new trend which has emerged lately and is gaining increasing popularity is that of securing life insurances in the name of the indebted students.
At first glance it may seem absurd. Why would someone that young and healthy require a life insurance?
However, when thought about it rationally, this is a very prudent financial move. Even though it seems highly unlikely that young college students who are at the prime of their lives would require life insurance, yet accidents can happen to anyone. In case of such an unfortunate event, it is often those that survive the deceased and are immediate of kin (parents or spouse) who have to carry the debt forward. This is especially true in the case of those who subscribe to private student loans, as most private loans require co-signers and further do not include the clause of a death discharge. Thus, in case the student who had actually taken the loan passes away, it is the co-signer who must repay the amount. In most cases the
co-signers turn out to be the student’s parents, and if they live on a limited income or are dependable the situation becomes all the more troublesome. Also, in those cases where a loan had been sanctioned without a co-signer’s presence, if the deceased happens to be married, her/his spouse might be expected to meet the outstanding debt (such arrangements mostly vary from state to state). Nonetheless, since the debt in question does not involve any small loans, whoever will have to take care of it will be highly inconvenienced.
Thus, a life insurance purchased in the name of such indebted students, act as a safety net for those who might have to shoulder the former’s debt in case disaster ever strikes. Such life insurance plans, which can cater to the requirements of a clientele like the students in concern, are also beginning to be abundantly available in the market today. For e.g. MetLife has a very useful product where, anyone with a student loan to her/his name, who’s not crossed the age of 40yrs and is a non-smoker can purchase a $100,000, 10-year term life insurance policy. And this is made available for a very reasonable monthly premium rate of a little more than $10. Anyone who falls in the same demography but is a smoker would however have to pay about $20 per month. Further, this particular form of life insurance can be availed of without any medical tests.
Even though it may seem like waste initially, it is a wise move to get life insurance for students with education loan debts.
Marie is a popular finance and insurance industry blogger. Be it life insurance, home insurance, small loans, mortgage or anything else – she writes on all topics related to the industry.
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