I was recently asked a question by a reader about the drawbacks of getting a private student loan. She asked why she shouldn't get a private student loan, when interest rates are so low right now. She would need to cosign with her daughter on the loan in order to get the best rate.
My advice was as follows: the biggest danger of a private student loan is that the cosigner is also liable for the debt. So, should something happen to her daughter, and she can't graduate and earn income, she will be on the hook for the debt.
However, there are options to protect parents when it comes to paying their children's tuition – tuition insurance. It is a product offered by GradGuard, and it provides coverage up to $50,000 per year and covers things like:
- Medical Disability Withdrawal
- Death of the Student
- Other Disability Withdrawal, such as emotional, mental, or nervous disorders
However, this isn't dropout insurance, so you can't get insurance if you voluntarily withdraw.
More Information on Tuition Insurance
Check out this video on tuition insurance and how it can be valuable coverage.
It Can Be A Great Value
If you are going to be paying for your child's education, tuition insurance can be a worthwhile investment. But if you are cosigning a loan for your child's education, tuition insurance is a must to ensure that you are protected should something happen to your child.
What are your thoughts on tuition insurance? A value for cosigners?