If Your Student Loan Has A Cosigner, You Need Life Insurance!

Term Life Insurance Can Ease The Burden

If Your Student Loan Has A Cosigner, You Need Life Insurance!

The last thing anyone is thinking about when preparing to go to college and seeking financing is what will happen if a death were occur. Neither the student nor the cosigner have usually contemplated what to do if either were to die. The Consumer Finance Protection Bureau (CFPB) has said that approximately 90% of student loans, that are not guaranteed by the Federal Government, have a cosigner. The last thing a family should have to endure is dealing with financial matters and collection efforts during the most difficult time of their life. This situation can be equally devastating whether the borrower or cosigner were to pass away.

What Happens If the Borrower Dies?

Loans that are not insured by the Federal Government, like those with Sallie Mae, will still require the money to be paid by the cosigner, even though the borrower has died. There are many horror stories like this on-line, like Steve and Darnelle Mason from California, where their daughter passed away from a liver disease and they were forced to repay the student loan. For them this proved to be financially devastating. In addition to having to deal with the pain caused by the loss of their daughter, their pain was compounded by this mountain of debt and a barrage of calls from Sallie Mae. Generally speaking, these debts are classified as a non-dischargeable debt under the Federal Bankruptcy laws, so they usually can't be removed through bankruptcy, making it even more difficult to deal with.

What Happens If My Cosigner Dies?

If this occurs, it triggers an automatic default and the full amount of the loan becomes due. Sallie Mae has been under fire for this practice, but it still happens. In cases where a grandparent cosigns for a loan, the death of this person prior to the loan being repaid happens more often than you would think. Just when the borrower is trying to establish themselves, the last thing they would expect to happen is to get a call from Sallie Mae demanding payment in full for the entire balance of the loan. The CFPB has issued urgent warnings to the public about the dangers posed by auto-defaults and the practice of lenders placing borrowers' loans in default because the cosigner has died.

How Can I Protect Myself, My Cosigner And My Family?

Luckily there is a very simple solution. Term Insurance is the lowest cost life insurance there is. The borrower will generally be young and in great health. Therefore, obtaining a term life policy for the term of the loan will have very low premiums. As for the cosigner, there are many options that are available for them as well. A term life insurance policy may be their best option as well. If either the borrower or the cosigner were to pass, prior to the loan being paid back in full, the life insurance will provide the necessary death benefit to extinguish the debt.


To determine what options are best for your specific situation, contact a professional at Family First Life, today.