insurance for med sch loans

[marydee]

What is the opinion for purchaseing insurance (life or term) to cover the cost of med school loans. By the time 4 years end, I will have a significant amount of loans and I don't wish to leave my parents with this burden. Do the med schools and independent lenders require some type of insurance to cover this situation? or is this up to personal preference?? Any help and details would be much appreciated. Any ideas?

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[mpp]

Your debts will die with you up to the amount of your assets. That is, your assets will be sold/liquidated to pay off your debts. Once there are no assets left, the lenders get nothing. In fact, in some states the creditors can't even go after certain assets such as a home.

I wouldn't worry about your debts after you die. Life insurance is mostly to help out with your spouse to take care of your children or to continue a similar lifestyle if you are the primary breadwinner.

 

[marydee]

Really!?! So if I have no assets and I die .... my parents nor my family members will have to pay up my loans? If I understand you correctly? ......Awesome! Thanks for your help mpp!

 

[Kalel]

The only way that government loans can be a problem is if you consolidate your loans with your wife and then die. Then, she will be responsible for both of your debt. That's why it's generally not advised that people consolidate with their spouses. Otherwise, as the previous poster indicated, government loans are automatically forgiven in death. I don't know about the private loans (non-stafford, non-perkins); if you have a lot of private loans, your life insurance may go to paying them off first so this might be something you want to look into.

 

[mpp]

Yes, your life insurance benefit would be part of your assets and the creditors can go after that as well.

 

[edmadison]

Originally posted by mpp
Yes, your life insurance benefit would be part of your assets and the creditors can go after that as well.

Actually, this is not usually true. Most life insurance policies name an individual benificiary. In this case the money passes to that individual irrespective of the decedant's estate (no taxes either!). In some cases the beniciary of the policy is the decedant's estate (almost always a bad idea). In this case, the creditors could come after the cash and the tax man!

Ed

 

[ttusom04]

Student loans are actually already "insured". That's why you pay a 3% fee off the top of the loan. These fees cover the lenders and government for the people that default. This is how it was explained to me.

 

[mpp]

There are many lenders that do not charge you a guarantee fee or origination fee.

 

[LoanGrl]

Stafford loans are forgiven upon death or total and permanent disability. They are govt. loans, and that is the govt. policy on those loans. That has absolutely nothing to do with the origination or guarantee fees. (the 3% fees mentioned earlier).

Life insurance is a SMART choice for anyone with private loans. Be sure to check the policy on your particular loan, but if you have a co-borrower or you are married, most private loans are NOT forgiven. You are leaving your spouse and/or your co-borrower with those loans. If you have a co-borrower on your private loans, you should make them a beneficiary of your life insurance policy. Life insurance is a smart choice for anyone who has a family.

It's a commonly held belief that "your debts die with you", but that is not always accurate.

 

[organic]

I also got the impression that private alternative loan lender will go after my spouse or my co-borrower if I die before paying back. Anyone thinks otherwise?

 

[mpp]

Spouse or co-borrower is correct, but not your parents.