Why Cosigners Should Consider Student Loan Life Insurance

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

Editorial Note: This content is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the financial institution.

Student Loan Life Insurance
Logo

OUR PROMISE TO YOU: Student Loan Hero is a completely free website 100% focused on helping student loan borrowers get the answers they need. Read more

How do we make money? It’s actually pretty simple. If you choose to check out and become a customer of any of the loan providers featured on our site, we get compensated for sending you their way. This helps pay for our amazing staff of writers (many of which are paying back student loans of their own!).

Bottom line: We’re here for you. So please learn all you can, email us with any questions, and feel free to visit or not visit any of the loan providers on our site. Read less


Need a student loan?

Check out our top picks below or learn more about other ways to pay for college.
1.09% to 11.98% 1
VARIABLE APR

Visit Lender

1.25% to 11.10% 2
VARIABLE APR

Visit Lender

1.24% to 11.99% 3
VARIABLE APR

Visit Lender

  • Variable APR

Life insurance could be extremely beneficial if a borrower dies while you’re cosigning their private student loans. This is because a cosigner could be responsible for paying the rest of the borrower’s student loan debt. Considering the financial stakes, purchasing a student loan life insurance policy and designating yourself as the beneficiary makes financial sense.

Student loan life insurance: Options and costs
When student loan life insurance isn’t needed
Cosigner insurance FAQ

Student loan life insurance: Options and costs

A term life insurance policy is the best choice for a cosigner looking to mitigate risk, said John Barada, a certified college planning specialist at Strategies for College in St. Louis. Common terms for a life insurance policy are 10, 20 and 30 years. A buyer also chooses a payout amount they would receive if the covered individual were to die.

The average debt among Class of 2019 graduates is $29,900, but the pool of insurers offering a term policy worth $25,000 is quite small, Barada said. When the term ends, the coverage ends, meaning you no longer have to make premium payments.

Cost of student loan life insurance

Annual premiums start at $81.25 for a $50,000 policy with a 10-year term that covers a man who doesn’t smoke. It’s a little bit lower — $77.12 — for the same policy and term covering a woman who doesn’t smoke.

Student Loan Hero compiled the lowest annual premiums and average annual premiums under certain scenarios:

  • 18-year-old men and women
  • Nonsmokers and smokers
  • 10-, 20- and 30-year terms
  • $50,000 and $100,000 policies

Here’s what we found. (Note: The following quotes were pulled Jan. 31, 2020, using the Compulife quotation system.)

18-Year-Old Man (Nonsmoker)
Lowest annual premiumAverage annual premium
$50,000, 10-year term$81.25$124.63
$50,000, 20-year term$87.33$140.14
$50,000, 30-year term$107$174.85
$100,000, 10-year term$83.75$133.67
$100,000, 20-year term$99$156.56
$100,000, 30-year term$120.30$199.37
18-Year-Old Woman (Nonsmoker)
Lowest annual premiumAverage annual premium
$50,000, 10-year term$77.12$106.53
$50,000, 20-year term$81.47$124.95
$50,000, 30-year term$95.50$149.33
$100,000, 10-year term$79$118.08
$100,000, 20-year term$89.90$136.40
$100,000, 30-year term$105.60$168.70
18-Year-Old Man (Smoker)
Lowest annual premiumAverage annual premium
$50,000, 10-year term$116$191.54
$50,000, 20-year term$134.50$224.74
$50,000, 30-year term$170.50$281.44
$100,000, 10-year term$157.85$259.18
$100,000, 20-year term$193$313.73
$100,000, 30-year term$234$423.33
18-Year-Old Woman (Smoker)
Lowest annual premiumAverage annual premium
$50,000, 10-year term$91.50$160.18
$50,000, 20-year term$106.50$183.91
$50,000, 30-year term$138$231.38
$100,000, 10-year term$113$208.93
$100,000, 20-year term$143$248.98
$100,000, 30-year term$186$330.32

The annual premium for a policy with $50,000 in coverage can be negligible compared to the annual premium of a $100,000 policy, Barada said.

When student loan life insurance isn’t needed

Purchasing student loan life insurance isn’t necessary with the following federal student loans:

When a student who has outstanding federal loans dies, the loans are discharged. The federal government also discharges PLUS loans if the parent or student borrower dies. A family member must provide the loan servicer with the death certificate to eliminate the loan balance.

While it’s not common practice, some private lenders, such as Sallie Mae for example, will discharge student loans when the borrower dies, even if there is a cosigner.

A cosigner, however, may get a 1099-C and have to pay taxes on the discharged loan amount, so having a life insurance policy could still prove helpful.

Cosigner insurance FAQ

Should I consider a student loan life insurance policy if I’m a cosigner on federal student loans? No. With federal student loans, you can only cosign on a spouse’s income-driven repayment application. You’re not obligated to repay the loan, which would be discharged if the borrower died.

How do auto-default clauses affect my life insurance decision? The borrower’s death could trigger the entire student loan balance to be paid immediately by the cosigner. Say a borrower was making $300 monthly payments but still owed $25,000 on their student loan. That means the lender could seek $25,000 rather than continued payments.

Am I able to get a private student loan without a cosigner? It’s possible to find lenders, such as Ascent, that target borrowers without cosigners. But according to a 2017 report from the Consumer Financial Protection Bureau, nearly 90% of private student loans require a cosigner.

Should I consider cosigner release if available? Yes, but don’t make cosigner release availability a key factor in your decision. Lenders can offer cosigner release if loan payments are made on time for a certain period, but contract language tends to favor the lenders, said Adam S. Minsky, a Boston-based student loan attorney. Private student loan lenders that do offer cosigner release include College Ave Student Loans, CommonBond and PNC.

How often do cosigners find themselves legally responsible? A 2019 AARP report found that 25% of private student loan cosigners 50 and older had to make a loan payment because the student borrower failed to do so. Nonpayments can wreck a cosigner’s credit score and can cause financial hardship if the loan goes into default.

Melanie Lockert contributed to this report.

Interested in refinancing student loans?

Here are the top 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.89% – 6.66%1Undergrad
& Graduate

Visit Splash

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.99% – 5.34%4Undergrad
& Graduate

Visit Earnest

1.97% – 8.54%5Undergrad
& Graduate

Visit Lendkey

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.


2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of December 1, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


5 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 11/13/2020 student loan refinancing rates range from 1.97% to 8.54% Variable APR with AutoPay and 2.95% to 8.77% Fixed APR with AutoPay.

Need a student loan?

Check out our top picks below or learn more about other ways to pay for college.
Variable APRDegrees That QualifyMore Info
1.09% – 11.98%1 Undergraduate
Graduate

Visit College Ave

1.25% – 11.10%2 Undergraduate
Graduate

Visit SallieMae

1.24% – 11.99%3 Undergraduate
Graduate

Visit Discover

1.05% – 11.44%4 Undergraduate
Graduate

Visit Earnest

1.78% – 11.89%5 Undergrad & Graduate

Visit SoFi

2.69% – 12.98%6 Undergraduate
Graduate

Visit Ascent

3.52% – 9.50%7 Undergraduate
Graduate

Visit CommonBond