Life Insurance

Life Insurance and Student Loans

Graduation
Student loans enable many to pursue higher education, but you often need a cosigner. When your parent or relative cosigns on a student loan for you, they agree to be accountable to pay off the loan in the event that you can't.

It's undoubtedly a grim circumstance to consider, but what happens in the unfortunate event you pass away before paying off the loan? It's crucial to understand how student loan debt will impact your cosigners in the unlikely event that you pass away. A good life insurance policy can help protect your student loan cosigner.

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What happens to your student loans if you pass away?

Are you wondering if your student loans are forgiven if you pass away? Well, it depends on the circumstance and type of student loan. Below is an overview of how federal and private student loans are handled should unexpectedly pass away, leaving your cosigner to inherit your loans.

Federal student loan and cosigners

The U.S. Department of Education discharges federal student loans belonging to deceased borrowers. Consequently, cosigners will no longer be liable for the outstanding loan balance. However, the loan servicer will need an acceptable document to discharge the debt. This can be a certified, original copy or photocopy of the death certificate.

Private student loans and cosigners

If your parent or loved one cosigns your private student loan, they may not be as fortunate. If the borrower passes away, some lenders require the cosigner to assume the balance. The lender will ask the cosigner to continue making payments until the loan is paid in full. Other lenders may forgive the balance. 

Student loan policies typically outline how debt is handled if a borrower passes away in the fine print. Don't hesitate to reach out to your student loan servicer for clarification.

How to safeguard your student loan cosigners

Having a foundational knowledge of life insurance basics can help you understand how to protect your loved one who cosigns on a loan for you. To this point, if you have loans, it's worth considering purchasing a life insurance policy and listing your cosigner as the beneficiary. 

Does life insurance pay for student loans?

While the hope is that parents and loved ones will never be in this situation, it's worth knowing that the death benefit of a life insurance policy could be used to help your cosigner avoid financial hardship if you pass away before the balance on your student loan is paid in full. 

Term policies are relatively inexpensive, particularly for young adults in good health. Some providers offer coverage with premiums that can comfortably fit into most budgets. At Ethos, we can help you get that coverage right away for as little as $1 per day through our innovative platform. 

How to shop for a policy

When you're ready to purchase a policy, don't hesitate to shop around. Some insurance providers charge far more than others for the same level of coverage, and you want to ensure you get the best deal. You also want an insurance provider with a seamless process.

Another important consideration is to determine whether you want whole life or term life insurance. Term is what's recommended for cosigners. Generally, you can purchase coverage for a term that's equivalent to the repayment period on the student loan for a fraction of what you'd pay for whole life insurance

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At Ethos, we make it easy to shop for coverage that suits your needs. The entire application process is handled online. You don't have to speak with an agent or undergo extensive medical exams and blood tests. Simply answer a few questions, and you could be approved for coverage from a top-rated carrier in minutes. 

Choose from the following policies: 

  • Term life: Ethos offers 10, 15, 20, or 30-year term life policies. You could qualify for between $20,000 and $2 million in coverage, and there's a 30-day money-back guarantee if you change your mind after purchasing a policy. If you no longer need coverage before the term ends, you can cancel your policy without incurring any fees. If the term ends and you still need coverage, you can apply to extend the term or purchase a new policy. 
  • Whole life: If you're between 66 and 85 years old, you're guaranteed to get approved for a whole life policy. Policies are limited to $30,000, and there are no waiting periods. Upon turning 100 years of age, you'll also enjoy premium-free coverage. Be mindful that the premiums are higher for whole life policies as they remain intact for the rest of your life (assuming you make timely payments). They also accumulate cash value over time.

Unsure if you need online life insurance? Use Ethos' coverage calculator to do the math for and continue with the online application to view policy options and rates. If you're approved, you can purchase coverage the same day and get peace of mind knowing your cosigner is protected. It's that easy.

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