What happens to student loans when you die depends primarily on the type of loans you have. Federal loans are more likely to be discharged than private loans in the case of the primary borrower’s death, but some private lenders are adopting government-like policies. Discharge due to death is generally not accessible if the cosigner passes away, however.

Take the time to figure out what happens to your debt when you die because the outstanding balance could be passed onto your family or estate. Here’s what you should consider if…

… You have federal student loans
… You have private student loans
… You’re married with education debt
Plus: How to prepare and limit the damage

What happens to federal student loans when you die?

When it comes to federal student loans, the news is favorable.

If you die with federal student loan debt, you won’t have to worry about it being passed on to anyone else. Once you pass on, you’d be in line to receive a student loan discharge.

To receive this discharge, your survivors need to present an original, certified or copy of a death certificate to your federal loan servicer.

If you have Parent PLUS loans…

Federal Parent PLUS borrowers are also eligible for a death discharge in two scenarios:

  • You’re the student and you pass away, cancelling PLUS Loan debt borrowed in your parent’s name
  • You’re the parent and your child passes, cancelling the PLUS Loan debt in your name

Parents previously received a 1099-C form from the IRS after their debt was cancelled and, in some cases, had to face a hefty tax bill.

Fortunately, parents of deceased children won’t have to face tax consequences associated with the death discharge of a Parent PLUS loan. The Tax Cuts and Jobs Act of 2017 made student loan discharge due to death non-taxable. And more recently, the student loan stimulus in March 2021 also made all forms of forgiveness tax-free through 2025.

If you’re a Parent or Grad PLUS Loan endorser…

Like a private loan cosigner, a federal loan endorser allows borrowers with adverse credit history to access education funding.

If you endorse a PLUS Loan application and the primary borrower (the parent) dies, the debt would be discharged. The same holds true if you endorsed a Parent PLUS Loan and the parent’s child dies.

Conversely, if you as the endorser pass away, the primary borrower (the parent) would still be responsible for repayment.

What happens to private student loans when you die?

If you have private student loans, original or refinanced, things get a bit thornier. Some banks, credit unions and online lenders do offer a death discharge, but not all of them.

Keep in mind that, as with federal loans, discharging private student or parent loans due to death could require your family to supply documentation, such as a death certificate.

Private student loans, including refinanced loans, are more like traditional personal loans. As with these and other types of debt, private lenders might come for your estate when you die, depending on your state’s probate process.

Your family will generally have an easier time fending off debt that was borrowed strictly in your name. Still, ask your private lender about their policy. If it is unclear or if you want more objective advice, you might consider speaking with a certified student loan counselor or lawyer.

If you have a cosigner…

As the table above shows, if your private student loan has a cosigner, you might be in trouble. Your cosigner is typically legally responsible for your debt after you pass away, regardless of the type of loan in question. And, in some cases, cosigned debt repayment can be accelerated.

“The death of the borrower or the cosigner can trigger default,” said Heather Jarvis, a lawyer and student loan expert. “That means the entire balance becomes due immediately, even if the surviving signer has always made payments on time.”

So what should you do if you have cosigned student loans?

If you do have consigned student loans, investigate these three options:

1. Cosigner release: Typically, lenders require you to make on-time payments for a specified period of time and illustrate that you are financially capable of handling payments on your own. Once you’ve done this, you can obtain cosigner release. However, not all lenders offer this option.

2. Student loan refinancing: If you have private education debt with a lender that doesn’t offer a path toward cosigner release, refinancing your student loans could be a solution. Refinancing is a process that pays off your old loans and issues you a new loan. Through refinancing, you could remove your cosigner in a couple of different ways:

  • Qualifying on your own, effectively releasing your cosigner when your refinanced loan is originated
  • Applying alongside a cosigner (the same or different one) but only with lenders that have clear-cut cosigner release policies that would allow you to send your “guarantor” on their way within a period of months

3. Purchasing life insurance for your child: If you’re a parent cosigner, an insurance policy could net a sum of money to help cover the repayment of cosigned student loans. If you go this route, look into a policy that covers the cost of any outstanding debt. For example, if you’d be on the hook for $50,000, then seeking coverage for at least that amount could be wise. Before plunking down an expensive premium, though, discuss these options with a certified financial professional.

If you’re married, what happens to student loans when you die?

If you acquired student loan debt through marriage and live in one of the nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin — your spouse could be liable for your student loans after you die.

This is usually not the case if you took out your student loans before marriage, however. In this case, your spouse would be on the hook only if they are also a cosigner on your private loan, or if you jointly took out a spousal consolidation loan.

Prepare for what happens to student loans when you die

More than 7 out of 10 student loan borrowers admit to not knowing how death would affect their debt, according to a 2019 survey by HavenLife.

To be fair, the answer to what happens to student loans when you die isn’t a straightforward one. It depends on a variety of factors, including whether you…

  • Have federal or private loans
  • Have a cosigner
  • Live in a community property state

The best thing you can do to make sure you and your family are protected by understanding your lender’s policy regarding death discharge and reviewing it in depth.

Use the StudentAid.gov website to find your federal student loans and contact your servicers to find out their policies. Also, track down your private loans via old statements or your credit report and ask your lenders the same question: What happens to student loans when you die?

In addition, look into cosigner release and a life insurance policy that could help with any outstanding debt. You can also consider federal loan consolidation or student loan refinancing to simplify your payments and gather all your loans in one place.

Preparing now for what happens to your debt when you die can save your family from financial trouble down the line.

Andrew Pentis contributed to this report.

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