Student Loans? Get a Life Insurance PolicyBy: Brian Powell - August 6, 2014
When Steve and Darnelle Mason co-signed their daughter’s student loans to help her pay for nursing school, the couple never thought the decision would come back to haunt them. After all, that was what all parents did for their children – help them pay their way through college to receive a degree and hopefully obtain the career of their dreams.
And that most likely would have been the case for Lisa Mason, had she not succumbed to liver failure five years ago, leaving behind three children and $100,000 of loan debt.
Over the past five years, Mason’s parents have been responsible for trying to pay off their daughter’s student loan debts. Due to late payment fees and high interest rates, though, the initial $100,000 has ballooned into $200,000 in debt – a figure insurmountable on Steve’s $75,000 per year salary for being a pastor and Darnelle’s even smaller figure for being director of the church.
In desperate attempts to deal with their newly-found, crushing debt, the Masons have contacted the holders of their daughter’s student loans. Unfortunately, all of Lisa’s loans were held by private businesses instead of the federal government. If Lisa’s loans would have been granted by the government, her death would have resulted in loan forgiveness or at least refinancing options. Private lenders are not beholden to the same policies, however.
While one private lender has reduced interest rates and the overall payment for the Masons, the others have not been helpful at all, stating their hands are tied when it comes to the laws on loan forgiveness.
The Masons story lends great credence as to why students and parents should obtain a life insurance policy on the borrower when signing for student loans. A basic $250,000 policy can cost as little as $15 per month, and in the case of Lisa Mason, would allow for the repayment of almost all student debts if the borrower was to suddenly pass away.
“I absolutely wish we had [a life insurance] policy. We would not have struggled financially for the past four years with these private student loans, and our credit would not have been ruined,” stated Steve Mason.
Until Congress get its act together and passes comprehensive student loan reforms (such as the plans put for by Elizabeth Warren), one should be certain to take all precautions to ensure the least amount of hardship in the future.
Image via Wikimedia Commons