If You Have Student Loans You May Need Term Life Insurance


When it comes to student loans, we mostly think of how will we live with them? Far fewer people ask the question, “how will I die with them?” And it can be an important consideration.

Federally backed student loans generally provide for a discharge upon death. The borrowers family can provide documentation and paperwork that will release them from the debt. Privately backed student loans may not be as generous. It’s not that they will come after your survivors for the debt, but they may seek to have the loans at least partially paid out of your estate.

You can avoid any possibility of that happening by having a term life insurance policy in a sufficient amount – and a long enough term – to pay off your student loan debts in the event of your death. The policy death benefit can match the amount you owe, and be reduced in the future, as the loan balance is paid down, and eventually retired completely.

If nothing else, the policy will remove a potential financial question mark from your passing. This is especially important if the amount of your student loan debts are into the tens of thousands of dollars – or higher.

Protecting your spouse

Your spouse may not be aware that your student loan debt can be discharged upon your death. He or she may assume it isn’t – after all, they can’t be discharged in bankruptcy – and then continue to make the payments under the assumption that he or she is on the hook for the debt by virtue of marriage.

Having a term life insurance policy to extinguish the debt will relieve the burden completely.

Letting your cosigner out of the deal

A complication can develop if your loan involves a cosigner, and student loans usually do. This can be a problem primarily on private loans, but if it is, your cosigner can be on the hook for the entire amount of the loan.

The best and final way to put a stop to this is by having the debt paid through a life insurance policy specifically for that purpose. By paying off your debt automatically upon your death, the question of the debt will be put to rest for your cosigner. Your cosigner was good enough to put his or her finances and reputation on the line in order to enable you to get the loan. Having it paid off upon your death would be the last, best “thank you” you can give.

Not leaving a mess in your wake

Contemplating our departures from the world isn’t something any of us want to dwell on for too long. But if you do make an untimely exit, hopefully you want to leave the world a better place as a result of your being here. Or at a minimum, not leaving the world any worse for having been here.

By cleaning up any remaining debt upon your death you’re doing just that. Here’s the thing…millions of people are dependent upon student loans in order to be able to attain a higher education. By having your own student loan debt paid through a dedicated life insurance policy, you help to ensure that there will be money available for future students. As the saying goes, what goes around, comes around. Your foresight and generosity will benefit those who come after you.

That may not be a tangible reason for providing for the payoff of your student loans in the event of your death, but you’ll have the satisfaction of knowing that you’ll be doing all you can do to leave a positive legacy – if even an unspoken one.