Term life insurance likely isn’t on the radar for collegeÂ students. They are focused on hanging out with friends, finding an internship and keeping up with social media. After all, theyâ€™re young and healthy and any vague thought about an untimely death is scary business and best avoided.
Financial experts, on the other hand, advise that term life insurance for college students is extremely important to at least these categories:
- Students whose parents have co-signed a student loan.
- Students with a family or financial obligations like a mortgage or other debt.
- Students with dependent families.
The High Cost of Education
Consider, first, that college education is a huge investment that may require a student loan. Check out these average costs of tuition and fees for the 2017-18 school year: private colleges â€“ $34,740; state residents at public colleges â€“ $9,970; out-of-state residents attending public universities â€“ $25,620.
Multiply those dollars by four years of college and parents and/or students are shelling out somewhere in the range of $39,880 for the most affordable option to $138,960 at the top level, just for tuition and fees.
Add another $35,548 to $40,356 for room and board, and the cost of a bachelorâ€™s degree is beyond mind boggling. Itâ€™s no wonder roughly 68 percent of new college graduates carry student debt averaging $35,000.
No parent likes to think about the death of a child, but whatâ€™s worse is being weighed down by debt along with the grief of losing a beloved son or daughter. When you consider the extreme affordability of term life insurance for college students, itâ€™s practically a no-brainer.
Top insurance companies will cover a healthy college student for $250,000 in term life insurance for about $10 for females to $14 for males per month. A policy with a lower pay out, say $50,000, or enough to cover college debt, is available for about $8 a month for females to $11 a month for males. (See chart below for sample rates.)
How Student Loans Work
If you have a federal student loan, any debt owed upon the studentâ€™s death is forgiven. The loan is cancelled and co-signers or the studentâ€™s estate do not have to repay the money. However, thatâ€™s not the case with a private student loan from a bank or other other lender, which must be paid off.
If thereâ€™s no co-signer, the lender will take money from the studentâ€™s estate, if one exists, to pay off the balance. If a parent, spouse or friend co-signed the student loan, the co-signer is on the hook for the debt. Thatâ€™s where life insurance helps in avoiding a financial crisis.
Needs of Nontraditional Students
Of course, not every college student is young and single and relying mostly on parents to cover their school expenses. Increasingly, students 25 and older are common in undergraduate programs, with 18 percent of all undergraduate college students married. For the most part, theyâ€™re paying their own way. And about 25 percent are also raising children while pursuing college studies. Â
Adding term life insurance to an already strapped budget may seem like a heavy burden to college students, but premiums go up with every birthday. A college student who buys life insurance makes a sound financial investment at a price that will never be more affordable.
How Much to Buy?
Term insurance for students should at minimum cover any college loan debt and the policy should be equal to the estimated repayment of the loan â€“ say 10 or 20 years. Parents or spouses of college students should also consider adding enough term insurance to cover funeral costs, debt from other loans such as a car or home mortgage, plus the loss of present and future income and the resulting burden on the family.Â Â
The best time to insure a college student is before their first day of classes. But even if the college career is well underway, itâ€™s not too late to take action.
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