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Death is never easy. But when your loved one passes away, you have to deal with the fact that they won’t be around anymore, and that includes their debts.
If you’re dealing with the loss of a family member and trying to figure out how to handle their debts, you may be wondering if student loans are passed on after death. In this guide, we’ll tell you everything about student loans and death so that you can make the best decisions for your family.
What happens to student loans after death?
When a student loan borrower dies, their estate is responsible for paying back their debt. If there aren’t enough assets in their estate to cover the debt, then it’s up to whoever holds legal rights over those assets (usually a spouse or parent) to repay what’s owed. However, there are some exceptions: if the loan was taken out through a federal program like Direct Loan, then it will be forgiven after 10 years of payments—even in cases where no one else is liable for repayment.
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What happens to federal student loan debt when you die?
If you die, your federal student loans will be discharged, meaning no further payments will be required. Your parent, spouse or another person you appoint will need to submit proof of death to your loan servicer. This means an original or copy of the death certificate.
Federal parent PLUS loans will also be discharged if the parent borrower dies or if the student whom the parent borrowed the loan for dies.
What happens to private student loan debt when you die?
If you die with private loan debt, its future will depend on the lender’s policy.
Private loans you took out on your own are likely to be forgiven. (Ask your lender about its death discharge policy.) But a private loan that is co-signed by a parent or someone else might not.
Co-signers are just as responsible for the loan as the student is. If the student dies, the co-signer is obligated to repay the loan unless the lender has a policy stating otherwise.
This applies to most existing loans, but not to new loans. All loans taken out after Nov. 20, 2018, must release a co-signer in the event of the student borrower’s death, due to a provision in the Economic Growth, Regulatory Relief, and Consumer Protection Act.
If you have a loan that was issued before Nov. 20, 2018, and your lender doesn’t have an official discharge policy, there is still recourse. The lender will have a process in place called “compassionate review” that could still result in your loans being forgiven or co-signer released, says April Query, regional and community services manager for College Foundation of North Carolina. Contact your lender to find out what the process entails.
What happens to your parents’ loans in case of death?
Federal direct PLUS loans will be discharged if a parent borrower or student the PLUS loan was taken out for dies. Proof of death must be submitted to the servicer in the form of an original or copy of the death certificate.
If you have a private parent loan, contact your lender to find out its policy.
Do I have to keep paying my student loan if my parent or spouse dies?
Yes, if your parent or spouse dies, you will still have to repay your student loans. Even if your parent or spouse was helping you with payments, you are still legally bound to repay the loans.
Will death trigger a student loan tax bill?
Unlike some other debt forgiveness programs, death or disability discharge will not trigger a tax bill. The Tax Cuts and Jobs Act of 2017 included a provision that made student debt that is discharged due to death exempt from taxes. This rule is in effect until 2025 and applies to all federal and private student loans.
Are Student Loans Passed On After Death
If you die, your federal student loans will be discharged. If your parent took out a parent PLUS loan and they die, or if you die, that loan will be discharged as well. This means that you won’t be responsible for those loans when a parent dies. In every instance, proof of death is required for this discharge to go through.
If you have private loans, there are other options available to help with those debts. There is a statute of limitations in place for when private lenders can sue borrowers who default on their loans. The statute of limitations varies by state and lender, but it’s typically between three and ten years after the last payment was made on the loan.
If you fall behind on your payments and are facing potential legal action from your lender, there are ways to help protect yourself from being sued. You can contact your lender directly and ask them about any repayment plans or options that may be available to you. If this fails to work out for whatever reason (your lender doesn’t offer any plans or options), then consider contacting a lawyer who specializes in debt relief laws in order to help protect yourself from being sued by your debt collector(s).
Will my student loan be discharged if I die?
If you have federal government loans, yes. This means that your estate will not have to pay back those student loans. Survivors can apply for a death discharge to cancel a borrower’s federal student loans.
Parent PLUS loans may be discharged if the student for whom the parent received the loan dies. Also, the death of both parents with a PLUS loan (assuming both took out the loan) is grounds for the “death discharge.” The death of only one of the two obligated parents does not cancel a PLUS loan.
There is no administrative discharge for private student loans if you die. Private loan debts will be handled the same way as other debts. That means that they will be part of your estate. This estate settlement process (also called probate) varies by state. Some private lenders will use their discretion and agree to discharge loans when a borrower or co-borrower dies.
In the end, it’s important to remember that student loans are not discharged or forgiven after death. If you have a loved one who has borrowed money for college and passed away, you are responsible for paying off those loans.
If you’re worried about how this will affect your financial future, there are some steps you can take to help ease the burden. You can get financial advice from a professional—they’ll be able to tell you what options are available to you based on your situation and needs.
You may also want to look into refinancing your student loans with a private lender; this could lower your interest rate and make repaying them more manageable. And if you’re looking for ways to save money while still paying off your debt, check out these helpful tips!