This past week another heart breaking student loan story hit the press. CNN published the devastating report about the death of a 27-year-old nursing student and how her parents were left to raise her three children – and deal with her over $100,000 in student loans.
Her father Steve, a pastor earning around $75,000 a year, had his life turned upside down. He went from planning for retirement to dealing with destroyed credit, Sallie Mae, and trying to raise three kids. All because he cosigned on his daughter’s student loans.
Sadly, this is hardly the first time that we have heard about grieving parents getting stuck with their children’s student loans. While there have been efforts in Washington D.C., as well as petitions to change the law, things don’t seem to be changing anytime soon.
Even though thinking about your own death can be incredibly depressing, especially at a young age, it is important to do so for loved ones who may have cosigned on your student loans. If you have a parent or loved one who cosigned a loan for you, there are a few steps that you can’t take to protect them in the event of your untimely demise.
Option 1: Get your cosigners released from your loan
Not long ago this site covered the exact steps required to get your cosigner released. We even included the exact language suggested by the Consumer Financial Protection Bureau. The paperwork can be tedious, but if you get your cosigner removed from your loan, it protects them and you. The downside is that you need good credit and a solid income in order to qualify.
However, if you are denied or think you don’t have a change at getting approved, there are many other ways to get your cosigner released from your loan.
Option 2: Life insurance
If you find it impossible to get your cosigner removed from your loan, getting a life insurance policy may be necessary.
Before you go with the life insurance route, contact your lender and inquire about whether or not your loans would be discharged upon your death. If the loans will automatically be forgiven, a life insurance policy isn’t necessary. This is the policy of the federal government, but many private lenders will expect your cosigner to pay off the debt.
A phone call to your lender alone will not be enough, even if they tell you that your loans would be forgiven. Due to the level of importance of this issue and the fact that phone support people can be wrong, be sure to get it in writing. Also, be sure to forward the written document to your cosigner so that they have it for their records.
If it looks like your cosigner is stuck with your debt if you die, and you can’t get them released from your loan, a life insurance policy may be the best way to make sure that a tragedy doesn’t become a financial nightmare as well. The one little bit of good news here is that for many young people, a life insurance policy is relatively inexpensive.
If you cannot afford life insurance, you may want to discuss this topic with your cosigner. It is obviously difficult for a number of reasons, but it is a critical discussion to have. If necessary, your parents could take out a life insurance policy that pays out in the event of your death.
The Bottom Line
This is an incredibly sad and depressing topic to think about. Unfortunately, it is the reality of the world we live in. The person or people who cosigned your loans did a huge favor for you whether they realize it or not. Make sure the legacy you leave behind isn’t defined by the student loans you had.