By Cyril Tuohy
With graduate students sometimes carrying school debt loads well into the six figures, Guardian Life announced it has introduced a loan protection rider to its disability income protection policy.
Guardian’s Student Loan Protection Rider allows policyholders to receive up to $2,000 per month in loan reimbursement s on top of the monthly income replacement benefit they receive as part of their base policy.
Guardian claims this is the first time an individual disability income policy is structured to repay a student loan obligation.
Gordon Dinsmore, president of Berkshire Life, said the product was introduced after agents reported that loan default was cited by younger clients as “the greatest financial fear” in the event they become disabled.
For an extra $5 per month, the policy will pay out $500 a month if the policyholder meets certain terms, the company also said. The policy covers undergraduate and graduate loans, the company also said.
The loan protection is available to anyone with an advanced degree who buys or is already covered by Guardian’s ProVider Plus or ProVider Plus Limited-branded disability income insurance policies, according to a Guardian fact sheet.
“While their long-term earning potential may be strong, these recent graduates are extremely vulnerable in the first decade of their careers, when they haven’t had enough time to accumulate savings to cover their monthly loan obligations – not to mention their rent or mortgage – without a paycheck,” Dinsmore also said.
According to the Institute for College Access and Success, two thirds of college seniors who graduated in 2011 had student loan debt, with an average of $26,600 per borrower, but medical, veterinarian and law school graduates often carry far more than that.
Government-backed student loans cannot be eliminated in the event of bankruptcy, and private loans may not have any provisions for disability at all, according to Guardian.
With $1.2 trillion in student debt outstanding, the market for student loan insurance is also potentially huge.
Under the law, only people with “total and permanent” disabilities can have their federal student loans forgiven, but many disabilities – those stemming from musculoskeletal issues, cancer and chronic pain, for instance – tend to leave victims partially disabled, which means they are still on the hook for loan repayment.
Disability income insurance is designed to offer policyholders income in the event that they are unable to work because of a disability, but typically covers only a percentage of the lost income.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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