You’re heading off to college this fall, it’s your first extended time away from home, and you’ve got the whole world at your feet. You’re an adult now, and with that comes a number of privileges ... and also responsibilities.
Here are four reasons why a college student should purchase some life insurance when heading off to college.
#1 – For many of you, heading to college means taking out loans to help pay for college. Whether you attend a state school or a private college, college loans are a fact of life. According to recent government studies, almost 71% of bachelor’s degree recipients will graduate owing money on a student loan, some owing more than $35,000. Sometimes much more.
With federal student loans, if a student dies before paying off the debt, any debt owed is cancelled at death and your parents (or spouse) are free of repayment liability. Private student loans work differently, though. They generally require a co-signer, who becomes responsible for paying off those loans if the student dies. The repayment schedule for the loan may be accelerated after a death, and in some instances, the death may trigger a requirement for immediate full repayment. (A co-signed loan also can be dangerous for the student if the co-signer dies.) Not a good situation! A term insurance policy can provide the money to pay of these loans if the unexpected happens.
#2 – About 17% of graduates have parents with loans or other debt out on their behalf, totaling almost $31,000, on average. It might be credit card debt, home equity lines of credit, 401(k) loans, or even cash-out first mortgages. None of these debts will automatically cancel if the student dies prematurely. While no parent wants to consider the possibility of their child dying as a young adult, it does happen. This can be devastating and can sink families financially if they’ve co-signed on heavy private student loans or incurred other debts to help pay for college expenses. A simple term insurance policy, in an amount equal to the projected total college debt, can cover these debts.
#3 – You may not think about it now, but many students get married or have a child while in college. The National Center for Education Statistics reports that about 18% of college undergraduates are married, and the Institute for Women’s Policy Research states that more than a quarter of all undergraduate students are raising children while going to class. A term life insurance policy can pay for the education of the surviving spouse, as well as funeral expenses and any debts left by the deceased partner, and can provide money to help with raising any children.
#4 – Some students, especially those who are either the youngest child or an only child born later in life, may have older parents who are dependent on the student for part of their support. A term life insurance policy can cover funeral expenses and any debts the student may have left behind, plus provide some money left over to support the parents.
Remember: the main reason for buying life insurance is to protect someone who is financially dependent on you. It’s no different for college students. If someone financially depends on you, you need life insurance. Term insurance on a college student is extremely inexpensive; a 20-year-old can buy $100,000 of 10-year term insurance for about $10.00 per month. That’s very affordable. Do it now, before you head off to college. After all, it’s your responsibility!