Tag: Student Loans

Choosing the Right Life Insurance Policy for College Students

by Advantage One, posted in Lifestyle, Tips & Best Practices

One without the other could leave your loved ones at risk

No one wants to153437909(1) think about dying prematurely, but you may wish to discuss it if you have large private student loans. Taking out a life insurance policy for the student with the loan will protect parents or beneficiaries from inheriting a huge unexpected debt should tragedy strike.

Here are some basic facts to consider about how and why life insurance and student loans should potentially go hand in hand.

Death Discharge – Under such circumstances, the borrower’s estate is released from liability when dealing with federal student loans, but that may or may not be the case with private loans. Loan documents’ fine print will detail the protocol should you or your co-signer pass away before loans are paid off. Private lending giants Sallie Mae, Wells Fargo and Discover offer this service, but not all others do. If your lender is one that does not, it is strongly recommended to look into life insurance.

Similarly, life insurance for your co-signer is suggested, as well. Furthermore, if you don’t have a co-signer but are married, your spouse is likely to inherit your student loan debt should you pass on unexpectedly. That is, of course, unless your lender offers death discharge or you have life insurance.

Protecting Assets – Student loan blog site Tuition.io recommends estimating what your estate might amount to in the event of your passing before looking into or dismissing life insurance.

“Creditors can apply to your estate for payment, but if you don’t have any assets, you may not have much of an estate,” Tuition.io reads. “If you don’t have a cosigner or spouse to protect and any estate will go to your parents or someone else, it may not be a big deal. If you do have significant assets you want to protect or want to be able to leave something behind, insurance is smart.”

Types of Insurance – There are many different types of insurance, so make sure to be specific when researching details. The type you’re looking for in this case is term life insurance because you can set the length of the coverage to any given term. You would want the term to run for the same amount you likely have left on your student loans and for about the same amount on the loan balances. For best results, talk to a professional broker, but anyone can ‘try and check’ with the premiums to find your most manageable rate. Websites like InsuranceQuotes.com compile results from many top-rated insurers to help with your comparison shopping.

Your unexpected death would be a lot for your family to handle already; do you want them to have to worry about paying back tens to hundreds of thousands of student loans on top of it all? Helping ease that potential burden could cost as little as $10 a month. Leave a thoughtful legacy.

Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.

Pros and Cons of Federal and Private Student Loans

by Advantage One, posted in Loans, Tips & Best Practices

StudentLoan Deciding where to go to college or graduate school is a big decision, but deciding how to pay for it can be equally daunting. There are many different loan options to choose from when financing school for yourself or someone in your family that it can be hard to tell which is best. The following information will help you decide if a private or federal student loan is the right choice.

A federal loan is set up by the government to help students and their parents face the ever-increasing cost of an education. The United States Department of Education (DoED) offers federal loans through two programs: The William D. Ford Federal Direct Loan Program (Direct Loan) and the Federal Perkins Loan Program.

The Direct Loan Program is the largest federal loan program and includes four types of loans: The Direct Subsidized Loan, the Direct Unsubsidized Loan, the Direct PLUS Loan and the Direct Consolidation Loan. The Department of Education itself is the lender for each of these four loans.

The biggest advantage of a Direct Subsidized Loan is the fact that no interest is charged while the student is in school on at least a half-time basis or during a deferment period. Students must demonstrate financial need in order to receive a Direct Subsidized Loan, however. Another disadvantage to this type of loan is the fact that there is currently an annual cap between $3,500 and $5,500 depending on the student’s grade level, which is generally not enough to cover annual tuition.

The Direct Unsubsidized Loan has the advantage of being available to students who don’t demonstrate financial need. This benefit is balanced by the fact that the student is charged interest, even while in school. There is also a current annual cap of between $5,500 and $20,500.

The advantage of a Direct PLUS Loan is that it can help a student cover educational expenses that are not met by other federal loans. Caps on Direct Unsubsidized and Direct Subsidized Loans can leave portions of tuition unaccounted for, and a Direct PLUS loan is intended to fill that gap. The negatives of this type of loan are that good credit history must be demonstrated to obtain one and interest is charged even while the student is attending school. Interest on a Direct PLUS Loan is typically higher than the other types of Direct Loans.

The second type of federal loan program, the Federal Perkins Loan Program, helps students with exceptional financial need. The school itself is the lender with the Perkins Loan Program.

One of the benefits of a Perkins Loan is its low interest rate of five percent. Some of the downsides of a Perkins Loan is the fact that the amount offered depends on the availability of funds at the school, since the school itself is the lender. Another downside is the fact that there is a cap on how much can be lent annually, which is currently $5,000 for undergraduate students and $8,000 for graduate and professional students.

“Federal student loans offer borrowers many benefits not typically found in private loans,” according to the office of Federal Student Aid at studentaid.ed.gov. “These include low fixed interest rates, income-based repayment plans, cancellations for certain employment and deferment (postponement) options, including deferment of loan payments when a student returns to school.”

A private student loan is an alternative to federal loans. Borrowers who aren’t able to cover the cost of education with a Perkins Loan, Direct Subsidized or Direct Unsubsidized Loan and who demonstrate good creditworthiness might be able to obtain a better interest rate with a private loan to cover the remainder of the expenses than with a Direct PLUS Loan.

To obtain a better interest rate than a Direct PLUS Loan, however, it may be necessary for the parent of the student to co-sign. Another downside is the fact that the interest rate can fluctuate, and the borrower won’t be able to take advantage of federal programs that forgive or defer repayment.

If you have questions about student loans, please give one of our financial experts a call.


Used with Permission. Published by IMN Bank Adviser Includes copyrighted material of IMakeNews, Inc. and its suppliers.