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Students & Parents: Co-signed Student Loan then get Student Life Insurance now
Posted by Applegate Insurance Agency on
What happens if you co-sign your child’s student loan and they are unable to pay due to an untimely death? Sallie Mae, the largest private student lender, provides automatic private loan forgiveness if a student passes away, but not all private lenders offer such protection. Unlike federal student loans, private student loans are not automatically discharged upon the death of the student. If a parent co-signed the loan, they are on the hook for it, too and the lender can still pursue you and even take you to court to try to collect the amount because you co-signed the loan. Imagine dealing with the death of your child and finding out that you are also responsible for repaying tens of thousands of dollars in outstanding private student loans.
Fortunately, there is one simple, and relatively inexpensive, safeguard against this scenario: life insurance. Many parents don’t consider purchasing life insurance for a child, but if you’re co-signing private student loans you should verify what happens in the event of the borrower’s death. If the loan will not be discharged, you should seriously consider taking a policy out yourself or requiring your child to purchase a policy. It’s an inexpensive solution but the penalty for not buying life insurance can be emotionally and financially devastating.