<p>"Co-signing a younger relative's private student loans doesn't seem like such a reckless idea. After all, it's an investment in their education and careers, they'll certainly be able to pay it all back once they're educated, and they're going to outlive you, anyway. Jessica's best friend had her grandfather, now 80 years old, co-sign her private loans with Citibank. After her sudden and shocking death, now he's on the hook for $70,000." ...</p>
<p>Why</a> Private Student Loans Are A Dangerous Game - The Consumerist</p>
<p>The article says this is a legal gray area. I don’t see how it is. He cosigned and they want their money.</p>
<p>It is usual practice that if the student dies, student loans are forgiven. This “life insurance” is included in the rates for federal loans for both the student and the lender. Not so for many cosigned loans. But, yes, all of this is spelled out in the loan papers but students, parents, grandparents don’t bother to read the terms and think about possible consequences. Also if grand pop died, the student would have been responsible for all of the payment, a more likely scenario… My friend who was married to a much older man, has two daughters with hundreds of thousands of dollars of forgiven loans that their father took out and when he passed away last year, that was it.</p>
<p>
</p>
<p>cptofthehouse, what types of loans? Private loans? Are PLUS loans also forgiven if the parent who signs dies, or is the spouse still responsible?</p>
<p>I know that one way around this is to take out life insurance on the student for over the net worth of the loans. That said, I know that you can add some sort of insurance onto many loans that will forgive them if the lendee dies before they are paid. Are there private student loans out there with this option?</p>
<p>I think co-signers are in denial and just think they’re “helping out”…like helping a friend get a discount for a purchase at their place of employment. </p>
<p>and, there seems to be more of this stuff going on when the student is the first gen to go to college. Everyone is so impressed that they want to help. </p>
<p>Because the tragedy is the forefront of the story, what’s lost is that even if this girl had lived, paying back those loans with a chemistry degree would have been nearly impossible. The grandpa probably still would have been on the hook.</p>
<p>My information is old, but I know for a fact that Stafford loans in the 80’s came with life insurance on the student. If the student died the loan was forgiven. Give the FA office a copy of the death certificate and end of story. I can’t help you in the pirvate department or if the co-signer dies. Read your paperwork.</p>
<p>MomfromKC, I don’t HAVE any paperwork to read and if I did reading it after the fact to look for life insurance info would be pretty foolish I would think. I was inquiring to ask if anyone knew of companies that did offer this as a 2.9% private loan with life insurance would be a lot better than a 7.9% Parent Plus loan.</p>
<p>Back in ancient times when I was in college, I had a part time job at a bank. One of the benefits was the ability to buy, for a couple bucks a paycheck, group life insurance. I made sure I had enough to cover the tuition my parents paid, loan balances and potential funeral costs. My parents, like many, made many financial sacrafices to pay the majority of my college bills. I wanted them financially put back to where they had been if something unforseen had happened to me.</p>
<p>Now, online supercheap term life insurance is readily available. Parents or others who pay significant college costs or cosign a significant amount of loans should take out a policy on junior. The money won’t make up for a tragic loss, but it can stop the situation from becoming a financial tragedy as well.</p>
<p>As we know from my several posts on the subject, my parents cosigned my 38k private loan. I have life insurance to cover it and then some through my employer… had I not, my dad was going to look into helping me get my own policy. It’s an important thing to consider. My loans also release my parents as cosigners after two years of consecutive on-time payments. I set up autopay. If you’re going to go the private loan route, I think that’s definitely the way to go. Obviously you’d preferably not consider private loans at all, though.</p>
<p>
</p>
<p>I didn’t see any that supplied life insurance when I was shopping for my loans and I somehow doubt that any would offer it, but it’s not like it’s impossible to get your own policy. I’m not sure, but I wonder if I’d prefer a slightly higher fixed interest rate than the variable private, life insurance or not. I don’t remember off the top of my head but I think my current interest rate is somewhere between 3 and 5. The variable rate scares me, I’d get off it at just about all costs if I could. The need for life insurance isn’t the only con to private loan lending.</p>
<p>
</p>
<p>Good advice for anyone who is thinking about co-signing a loan. A young woman dying before her 80 year old grandfather is certainly not statistically probable, but obviously not impossible.</p>
<p>If someone does have an outstanding co-signed loan with a student, he/she can still take out term insurance on the student. It would be separate (not directly tied to the policy), but would accomplish the same thing.</p>