Using Life Insurance To Cover Student Debt
It may sound grim, but it’s actually parents being cautious and pragmatic with their financial planning. With the sluggish economy and the enormity of student loan debt, parents are now taking out life insurance policies on their college age children for the ultimate “what if”.
While painful to bear thinking about, having a life insurance policy in place for both parents and children is unfortunately necessary, especially in the case of teenagers and young adults. Those who are bound for college will enter with a heavy financial burden. The cost of tuition, books, and room and board if attending school out of state lead to debt, as well as the interest rates which attach to a student loan.
In the worst possible circumstance, parents (or a single parent or other legal guardian) may be faced with paying off a student loan that their child won’t gain benefit from. It’s a tough decision for a parent to make and for a child to face, but with recent studies showing that the average college student leaves with $26,000 in debt, it’s a step worth taking. Parents who co-sign a student loan with their child are the ones who would ultimately have to repay that debt should something happen.
It’s a sobering thought, but insurance is something you purchase with the hope of never using. Faced with the rising cost of education (it’s grown over 40 percent in the last ten years with $1 trillion dollars of that debt outstanding), knowing that the insurance is there can bring some peace of mind.
