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  • Student loan burden in case of my death

    Recent dental graduate, have been working 1 month - $380k in student loans (non-refinanced, in grace period)
    I was contacted by our family auto insurer with State Farm about life/disability policies. I told her that I plan to purchase both soon but have not yet because I am single w/ no dependents. (I am planning to purchase both through WCI recommendations and was not interested until ...) She offered to write up the policies and recommended a $25k policy to cover my student loans in case of my death, claiming that they would be passed on to my parents if I die. I was unaware of this, so I told her to go ahead and draw up the policies.
    I ended up getting back the life and disability quotes as expected, plus a $25k whole life insurance plan, despite making it very clear that I was not at all interested in whole life insurance. The whole thing feels very sales-pitchy, and I would like advice.
    I expect to make 250k - 350k in 2022, pay off student loans in 5-7 years, and will be a saving like mad for my first 10 years. Whole life just doesn't make sense to me - but is she right? Is there something else that I should be considering? Or do I need to purchase life and disability plans yesterday?
    Thanks in advance

  • #2
    Unless your parents co-signed private loans (and if they did try to refinance to a new loan without their signature), they will not pass on to your parents if you die. Federal loans are discharged at death. A private loan may (or may not) take from any estate you leave (depending on the private loan policy) but they can't make someone else pay if you die with a negative net worth.

    You are single without dependents; you don't need life insurance (whole or term) unless someone else depends on your income. Disability you should purchase but not from an agent who lies to you.

    I would contact State Farm (preferably the agent's supervisor / manager) and inform them you are canceling all of your polices with them due to their deceitful practices.
    Last edited by Gamma Knives; 08-04-2021, 01:23 PM.

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    • #3
      Wow - thank you for such a quick response! I really appreciate your advice. I had a feeling that line had a hook on it - I'm not biting.
      Have a wonderful week.

      -JD

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      • #4
        To be fair, you could absolutely have federal loans that you may consider your "responsibility" that are technically your parents responsibility (typically called a parent plus loan, but there may be other types of federal loans out there).

        But either way, what good would a 25k insurance policy do unless that covered the entirety of the parents liability....does sound like a super garbage proposal based on what you shared. Enough so that I would probably pull my other policies from that agent, unless there is more to the story.

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        • #5
          Did she also ask to be the beneficiary of your policies?

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          • #6
            I really appreciate you both. She is not our direct insurer, rather works out of the same office as the agent that provides my parent's coverage. She heard about my graduation and reached out offering to write up policies. Thank goodness for WCI or I would have fallen for it hook, line and sinker.

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            • #7
              Just fyi parent plus loan is discharged if the person who got the education dies.

              https://studentaid.gov/manage-loans/...ellation/death

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              • #8
                Originally posted by Gamma Knives View Post
                Just fyi parent plus loan is discharged if the person who got the education dies.

                https://studentaid.gov/manage-loans/...ellation/death
                Good call. Didn’t know that, now I do!

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                • #9
                  Originally posted by jacob_LSUDDS View Post
                  I really appreciate you both. She is not our direct insurer, rather works out of the same office as the agent that provides my parent's coverage. She heard about my graduation and reached out offering to write up policies. Thank goodness for WCI or I would have fallen for it hook, line and sinker.
                  Of course she did…

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