Student loans from the federal government, also called Direct Loans, can be used to buy health insurance. However, there are a few factors that determine whether this is or isn’t a wise choice.
For students enrolled in a university with mandatory health insurance
Many universities make it mandatory for new students (enrolled for at least half-time classes), to be covered by adequate health insurance. In some cases, the university may have a tie-up with a reputed third-party organization to address student insurance needs, and the costs are included in the total enrollment fees.
In any case, this works in favor of the students, as the university’s mandate automatically includes health insurance costs under Cost of Attendance (COA). This is the critical figure used by the government, as need-based student loans are capped on the COA. So, in most cases, your health insurance may already be covered by the COA.
For students enrolled in a university without mandatory health insurance
If health insurance is not mandated by your university, it is still advisable to protect yourself against unexpected health setbacks. Also, health insurance is considered an acceptable expense covered by the COA projected by your university. However, you may need to work with the student counselor in your university’s financial aid office, and complete the required paperwork to attach your health insurance costs to your student loan.
What happens if you have used up your COA cap
For need based direct loans that are subsidized by the government, you only qualify for an amount capped by the COA. If you have already reached your cap, you will need to turn towards other non-subsidized loans to cover your health insurance costs.
Student health insurance covered by parents’ health plans
If you have exhausted all your student loan options, but have still not been able to cover for health insurance, then your parents can consider family insurance plans that also cover children below 26 years of age, even if they are living apart and are not dependant on the parents.
However, the insurance is active as long as the parent’s eligibility is maintained. If the parent loses his or her job, or switches to a non-family insurance plan, the coverage for the child automatically ceases.
In closing, remember that there is no ‘big brother’ to watch and keep track of how you spend the loan amount you incurred as a student. In fact, many people get into lifelong debt because they mismanage students loans to cover living expenses unattached to COA. But at the end, all student loans have to be paid, and the ticker starts the moment you stop being a student. So, think wisely when choosing a college and what degree program you’ll be pursuing and career outlook.
Health insurance is important, and if it cannot be covered by your existing student loan or the Direct Plus loan for parent, consider alternatives such as family insurance to manage your costs in the long term.