Parents Take Out Life Insurance on Recent Grads


life insurance for student loan debtThis post originally appeared on The Fiscal Times.

When my parents first announced at Thanksgiving that they were taking out a life insurance policy on me, I was taken aback and slightly offended. In fact, I thought it was a cruel joke.

Why would they need to do such a thing? I’m only 27. The mere thought of it was grim.

But they did have a reason: my student loan debt. Since they co-signed with me for the loans, they’d be left with the debt if I ever—god forbid—died.

I asked several friends whether they’d heard of such a preposterous idea, and one friend told me his parents, too, took out life insurance on him immediately following his college graduation.

This is apparently becoming a trend—a disturbing one

An increasing number of parents are taking out life insurance policies on their college graduates in an effort to avoid being left tens of thousands of dollars in debt if their child dies and can’t repay the loans, The Financial Times reports. With unemployment above seven percent and many baby boomers having already tapped their retirement savings just to weather the difficult economic times, the last burden a grieving parent needs is a loan company hounding them to make payments.

RELATED: How the Student Loan Crisis Hurts the Housing Market

We all know student loan debt is nearing bubble-bursting levels and ready to swallow students and parents. In 2012, outstanding student loan debt exceeded a breathtaking $1 trillion, surpassing other types of debt including credit cards and car loans to become the second largest source of consumer debt behind home mortgages.

To break that down into a figure we can actually comprehend, a recent U.S. News & World Report found that 2011 graduates shouldered an average of $26,220 in student loan debt. My outstanding school loan debt from undergraduate and graduate school is double the average, but I still didn’t think it was enough for my parents to take out the minimum $100,000 life insurance policy on me.

At my parents’ request, when I got the phone call from the life insurance company several weeks ago, I reluctantly obliged and went through the 30-minute verbal questionnaire. The woman on the other end of the phone told me she was surprised to hear how healthy I am.

So I asked her if this was the first time she’d gone through a policy with a young, healthy individual relating to student debt. She said it wasn’t.

How much does this sort of policy cost? MetLife offers a non-smoking individual under 40 with student loans a 10-year, $500,000 life insurance policy for about $10 per month.

What do you think? Have your parents considered taking out a life insurance policy on you to protect them from your student debt? Would you support the idea?

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  • Dani

    Honestly I think the tone of this article expresses an attitude I typically don’t see on this website. You come across as selfish and spoiled, aghast that your parents would think about protecting themselves in the unlikely event something happened to you. Grow up – you are incredibly fortunate they co-signed your loans in the first place! LearnVest I’d appreciate a more sympathetic writer.

    • Richelle Thomas

      I don’t think she’s selfish at all. I think the beauty of LearnVest is that it allows authors to express their true feelings. I am only 26 and I can say that her comments resonated with me. I honestly hadn’t even thought of getting life insurance for myself. Fortunately, I do not have student loans but I think LearnVest did a great job of bringing this topic to our attention for us to consider.

  • Laura

    Completely agreed with Dani’s comment. Taking out life insurance on a recent grad sounds like an incredibly prudent idea. If parents have life insurance on themselves, why not get life insurance on their children too?

  • Anne

    My nephew was killed in a car accident right before he graduated. My brother was left to pay his loans and is still paying them 8 years later. It becomes another reminder of his loss every time he has to make a payment. Plus, my brother is close to retiring and this has hit him hard financially! Would the author want to be paying her parents’ loans after their death?

  • Guest

    The only thing that surprises me about this article is that the writer did not have the sense to take out the policy herself. I immediately took out my own policy with my own money listing my father and grandmother as beneficiaries to cover the loan amounts. Why would you want to leave your parents/loved ones in a precarious financial position should something happen to you? If you know a loved one would have to pay for your debts if you die, you should ALWAYS get life insurance to cover those costs (and disability insurance to help cover payments if you are injured but not killed). It is incredibly cheap (especially if you are young and healthy) and gives everyone peace of mind. It is irresponsible to leave your co-signers out on a limb like that.

  • Ayn Roberts

    I completely understand where the author is coming from in writing this article. As a young healthy individual, life insurance is not always something you think about. When life insurance is heavily marketed to demographics that are usually elderly or have certain conditions that bring such possibility to mind, it’s clear to see how the author was caught by surprise in this conversation. I appreciate Learnvest for bringing this discussion to me, it makes me think about the benefits to having something like that for myself.

  • QualityTermLife

    Although, it is extremely rare for a young person to die, there may be the occasional need to insure grads because of loans. Fortunately as the author points out life insurance is as inexpensive now as it has ever been.

    But you can do much better than MetLife. To find the lowest cost policy, use a free search engine like the one at QualityTermLife to compare prices from top rated companies.

    I just looked at today’s rates, and 10 years of $5000,000 coverage for a 22 year old female in good health is only $6.27/mo or $79/year!