Buying life insurance for college students

Students with co-signed private student loans or financial dependents may need life insurance.

Logan Sachon

By

Logan Sachon

Logan Sachon

Senior Managing Editor, Life Insurance & Research

Logan Sachon is the senior managing editor of life insurance and research at Policygenius, where she edits life insurance content and leads life insurance surveys and data studies. As a journalist, her work has appeared in The Guardian, Business Insider, CNN Money, BuzzFeed, Money Under 30, VICE, New York Magazine, and elsewhere.

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Most students don't need life insurance, but there are some who may need a policy to protect loan co-signers, spouses, or other dependents.

Key takeaways

  • Some students with private student loans taken out before Nov. 20, 2018 may need life insurance to protect their co-signers. (A 2018 law requires private student loan debt after that date to be discharged if the student dies.)

  • Co-signers of private student loans taken out at any point may also need life insurance to protect the student-borrower, depending on the loan’s provisions. (Some private loan companies ask for immediate repayment if the co-signer dies.)

  • Federal student loans are forgiven if the student-borrower dies. (Parent PLUS loans are forgiven if the parent-borrower or their student dies.)

  • Students with dependents need life insurance to protect their families.

Life insurance for students with student loans

Sixty-nine percent of college students from four-year universities graduate with an average of $29,650 in student loans. [1] Most student loans are discharged in the event of the student's death, but there are some students (and former students) with co-signed private loans whose loans may auto-default to the co-signer, and those students may need life insurance.

Do students with federal student loans need life insurance? 

Students with federal loans do not need life insurance to protect a co-signer, as federal loans are discharged after the death of the student borrower. Parent PLUS loans are discharged if the parent borrower or their student dies.

Do students with private student loans need life insurance? 

Some students with private student loans need life insurance, depending on when the loans were taken out, whether they have a co-signer, and whether they are married and live in a community property state:

  • Students with private student loans taken out after November 20, 2018, with a co-signer, do not need life insurance to protect their co-signers. Co-signers of private student loans taken out after Nov. 20, 2018 are protected by the Economic Growth, Regulatory Relief, and Consumer Protection Act, [2] signed into federal law in 2018, which releases co-signers from any obligation if the student borrower dies. 

  • Students with private student loans taken out before Nov. 20, 2018, with a co-signer, may need life insurance to protect their co-cosigners. If the student dies, the co-signer will still be responsible for the debt, and depending on the provisions of the loan, it may auto-default with the balance due immediately. A life insurance policy covering the student with the co-signer as the beneficiary would ensure they could pay the balance of the loan if the student died. 

  • Students with private student loans taken out anytime, without a co-cosigner, may need life insurance in some specific circumstances. If you took out a private student loan with no co-signer, upon your death, the debt will be likely canceled and no one would be liable for it — with a few exceptions. If you are married, live in a community property state, and took out the loan after your marriage, that debt could become your spouse's responsibility after your death if your lender doesn’t release the debt (some do). Also, if you have an estate, the lender may attempt to get payment from the estate. In both cases, a life insurance policy could protect your spouse and/or heirs. 

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Do co-signers of private student loans need life insurance? 

Some co-signers of private loans may want to have a life insurance policy to protect the student-borrower if the co-signer dies. Some private loan companies have provisions that auto-default the loan and request that the student pay the entire amount due immediately if the co-signer dies or files for bankruptcy. 

Student borrowers and co-signers should check their paperwork, and if the debt does auto-default if the co-signer dies, discuss repayment expectations. The co-signer may want to have their own life insurance policy to ensure that the student can pay off the loan without the financial consequence. (An alternative would be to require the student to refinance the loan at that time.)

How much life insurance do you need to cover a student loan?

When buying life insurance to cover a student loan, or any other debt, the face amount of the loan isn’t enough. You need to plan for any interest that would accumulate over the course of the loan term as well so that you could cover the amount even as it gains interest.

To figure out how much coverage the student-borrower needs calculate:

  • The loan balance plus interest

  • The loan term

Private loans have the choice between fixed or variable interest rates. For variable-rate private student loans, the interest rate often starts around 3% to 4%, but it can increase to as high as 11%. [3] Fixed-rate private student loans typically have interest rates between 3% and 13%.

For example, if your interest rate for a private student loan is 7.99%, a $13,600 loan with a term length of 10 years will end up costing nearly $19,800 with interest. Account for the full amount when you shop for coverage and ensure the policy lasts as long as the loan will have a balance.

Can a co-signer buy life insurance to cover student loans? 

A co-signer of a private student loan can purchase a life insurance policy on a student-borrower to protect themselves, but they need the student-borrower to be on board and share their medical history and maybe undergo a medical exam. (To buy life insurance that covers someone else, you need insurable interest, and a co-signed loan falls under that umbrella.)

If you need to purchase a life insurance policy to cover a student loan, Policygenius works with over a dozen of the country’s top insurers. Our agents give helpful advice while comparing insurance quotes.

Life insurance for students who are married or have dependents 

If you have people that depend on you financially like a spouse, children, or other dependents, you need life insurance — even if you’re a student. 

Even if you’re not making an income as a student, you may still be providing economic support to your spouse or dependents — especially if you’ve taken out loans to cover the cost of your rent, bills, or any other everyday expense.

If you die and can no longer help your partner pay the bills, they’re going to incur that additional cost. Alternatively, if you performed any unpaid labor that would have to be replaced — such as child care, work around the house, or care for elderly parents — your partner would likely need to hire someone or take over the responsibility themselves and possibly take an income hit.

A life insurance policy can ensure that your loved ones aren’t struggling to pay some of the following expenses:

  • Rent or mortgage

  • Monthly bills

  • Everyday expenses

  • Child care or dependent care

  • End-of-life expenses

Generally, life insurance is meant to replace your income if you die, and the amount of coverage you can qualify for is based on your income. If you are earning an income while a student, you could get coverage based on that income. But if you need more coverage, or don’t have an income, there are other ways you could qualify: 

  • Your spouse’s income: If you’re not earning an income at all while studying and your spouse works, you may qualify for life insurance based on their income. 

  • Your projected income: If you’re in graduate school, law school, or medical school, some insurance companies will offer you coverage based on your projected degree and expected income. 

Maximum coverage available for graduate students by company

LIFE INSURANCE COMPANY

MAXIMUM COVERAGE AVAILABLE

AIG

$1,000,000

Banner Life

$1,000,000 for grad students; $2,000,000 for medical or law students

Brighthouse

$500,000 to $1,000,000

Lincoln Financial

$250,000

Mutual of Omaha

$250,000

Pacific Life

$250,000

Protective

$250,000

Prudential

$1,000,000

SBLI

$250,000

Transamerica

$1,000,000

How to choose a life insurance company for college students

There are two main kinds of life insurance: whole life and term life. Term life is the right kind of life insurance for most people, and it's the kind of policy you’ll want to buy to cover a debt like student loans.

Term life insurance is significantly cheaper than whole life insurance and only lasts as long as you need coverage, whereas whole life lasts for a lifetime. The best term life insurance company for students will depend on their health profile and coverage needs.

How much does life insurance cost for students?

The cost of a life insurance policy for students depends on several factors, including:

  • The student’s age

  • The student’s health

  • Coverage amount

  • Coverage length

Based on policies offered by Policygenius in 2022, a healthy 20-year-old with no family history of disease can get a 20-year, $50,000 term life insurance policy for just $10 to $13 a month. They may even be able to skip the medical exam and get coverage faster.

→ See the life insurance companies our experts recommend

Frequently asked questions

Do you need life insurance in college?

It's good to have life insurance if you co-signed a private loan or Parent PLUS loan with your parents. The payout protects them from your debt if you pass away.

What type of life insurance do college students need?

College students covering private loans should get a simple term life insurance policy that's affordable and only lasts as long as it's needed.

Can life insurance money be used for college?

A life insurance payout can be used for anything, including your child's future or current college expenses.

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. The Institute for College Access and Success

    . "

    Quick Facts About Student Debt

    ." Accessed March 03, 2022.

  2. CONGRESS.GOV

    . "

    S.2155 - Economic Growth, Regulatory Relief, and Consumer Protection Act

    ." Accessed October 07, 2022.

  3. LendEdu

    . "

    Current Student Loan Interest Rates

    ." Accessed March 03, 2022.

Author

Senior Managing Editor, Life Insurance & Research

Logan Sachon

Senior Managing Editor, Life Insurance & Research

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Logan Sachon is the senior managing editor of life insurance and research at Policygenius, where she edits life insurance content and leads life insurance surveys and data studies. As a journalist, her work has appeared in The Guardian, Business Insider, CNN Money, BuzzFeed, Money Under 30, VICE, New York Magazine, and elsewhere.

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