When a student goes abroad, the last thing a parent wants to think about is worst-case scenarios. But the fact of the matter is worst-case scenarios do happen. Students do encounter accidents and dangers and crises when they leave the country, some have lost their lives. The death of a student is, first and foremost, a tragic loss of a human life. That tragedy often comes with unforeseen financial costs and other complications.

When a student dies, his or her student loan debt – which can total up to tens of thousands of dollars – is transferred to the loan’s cosigners. In many cases cosigners are parents who may or may not be financially able to cover the added debt and cope with loss and funeral expenses. As traumatically unpleasant as it is, it’s important to examine options and go into a study abroad experience, or even college for that matter, expecting the best and prepared for the worst.

In certain situations, parents can have their child’s federal student loans forgiven. This means the parents will not be responsible for their child’s debts. The parent would have to provide a copy of the death certificate to the student’s school or to the loan servicer. It’s important to note that while the loan discharge is being approved, parents will still have to continue making payments. Depending on the type of loan discharge, the United States Department of Education may be required to reimburse parents for some or all of the payments they made on the loan. In most cases, a denied loan discharge cannot be appealed. Parents will have to look into options for paying off the loan. This scenario is for federal loans only.

Some private lenders also offer death discharge, but not all of them. When they don’t, things can finances can deplete quickly. The cosigner on these loans may be required to pay them in full, and in most cases, the loan becomes defunct – this means the cosigner has to pay them in full immediately. When this happens, parents can look into a cosigner release which may allow them to make the payments on a schedule rather than up-front, provided they can demonstrate they can make those payments on time.

There is a third option, which is a available before any of this happens: life insurance. If a student’s loans cost a significant amount of money, it can be smart to invest in life insurance. A basic plan with up to $250,000 coverage costs only $15 a month, that’s $180 a year or $720 over four years, not even 1% of the loan.

CNN recommends parents shop for life insurance and check their lenders’ policies. It’s possible private lenders can forgive student loan debt in the event of a death.  In this case, life insurance wouldn’t be necessary. Parents should search for a policy with flexible length of coverage and above all, equity to the loan balance. It’s every parent’s worst nightmare to outlive their children.  Financial loss during crisis does not have to impact a family’s financial security by suddenly being forced to assume tens of thousands of dollars or more in student loan debt.  Financial crisis on top of devastation does not need to materialize. Before your child goes to college, make sure college debt is covered in case of death.
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