The overwhelming amounts that are owed are leading to some unique protection strategies.
A life insurance trend has been building over the last short while that has parents taking out policies on their children in order to protect themselves against the overwhelming student debt that they carry.
Many parents co-sign on student loans, leaving them at a considerable risk if their children should die prematurely.
It is becoming increasingly common for parents to protect themselves from the debts of their children’s educations by purchasing life insurance policies following their graduation or leaving their post secondary programs. Though this is a difficult thought for families to consider, it is also a very realistic one.
Life insurance is being used to protect against the tens of thousand dollars outstanding in student loans.
This technique is being used in the case that the parents’ child should die without being able to repay the loans. As unemployment sits higher than 7 percent, and baby boomers are already dipping into their retirement funds just to be able to get through this struggling economic period, any additional financial burden – particularly one as large as student debts – could be devastating.
At a time when a parent is already grieving, the very last thing that he or she would need is a lender breathing down his or her neck and hassling for payments. At the same time, many financial experts believe that the student loan debts are reaching their own bubble bursting point, which could be crushing for families who are unprepared.
In 2012, the total American student loan was greater than $1 trillion, which is greater than nearly any other kind of debt in the country, including auto loans and credit card debt. It is second only to mortgages as a source of consumer owing.
Parents are becoming increasingly aware of the threat that this presents them, particularly if their child should die and their estate not be adequate to cover all or at least the majority of the student debt. Life insurance is becoming the primary form of ensuring that if the worst should happen, at least they will be financially covered.