|By Tim Grant, Pittsburgh Post-Gazette|
|McClatchy-Tribune Information Services|
While federal student loans have a provision that discharges the debt if a borrower dies, private student loans are a different story.
Private lenders such as financial institutions are under no obligation to forgive student debt.
In addition, student loan debt is nearly impossible to discharge in bankruptcy and any co-signers are held responsible for the funds.
"We don't see enough parents considering this scenario," said
One recent high-profile example was
The couple took in their three grandchildren and assumed
With late penalties and interest over the past five years, the balance has mushroomed to
The chances of someone in their 20s dying is rare. According to the Commissioners Standard Ordinary Mortality Table, produced by the
"It's about as likely as a house burning down. But that's what insurance is for — the unlikely event,"
Nationally, total outstanding student loan debt has reached a staggering record high of
The majority of private student loans require a co-signer. According to a report by the
However, the largest private lender in the student loan marketplace has taken the lead in giving parents some relief in worst-case scenarios.
Loans that predate 2009 are not covered by the forgiveness policy.
"We think there should be greater protections for co-signers and private borrowers in general," she said.
"A number of companies do offer discharge rights if the borrowers die. But co-signers may still be on the hook. Unfortunately, a lot of co-signers don't know what they are getting into when they co-sign student loans.
"Ideally, there should be some kind of relief for borrowers in that situation," she said.
"It's an issue many people are sensitive to. It's a tragedy when a child dies, and for a parent to be stuck with the lingering student loan debt is salt in the wound."
For now, a life insurance policy is the best option for parents, according to
"A life insurance policy with a death benefit of the total student loan debt on the child would help insure that in a tragic event such as the loss of a child, the debt would be paid in full,"
"Parents could focus on what is truly important at that time, which is the family. They would not have to think about the financial hardship the tragedy created."
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