You may worry about leaving your loved ones saddled with your student loan debt if you die when you still owe money. If you're wondering what happens to student loans when you die, the answer will depend on a number of factors, including whether your loans are federal or private and if you had a cosigner.
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What happens to federal student loans?
What happens to federal student loans when you die?
If you die owing money on federal student loans, the U.S. Department of Education will discharge your loans. That means your family members won't be responsible for paying off your debt.
This applies whether you took on federal student loan debt to pay for your own education or if you took out a Parent PLUS loan to pay for your child's education. In fact, Parent PLUS loans can be canceled if the student or the borrowing parent dies.
To get someone's federal student debt discharged after their passing, the person's loved ones will need to submit proof of their death to their student loan servicer.
What happens to private student loans?
What happens to private student debt when you die?
Most (but not all) private lenders offer a death discharge, which means they'll cancel student debt when you die. Things get a bit more complicated if you have a cosigner, which we'll discuss in the next section.
Cosigner
An individual who accepts full responsibility for paying back a loan if the primary borrower doesn't pay back a loan as agreed to.
However, if your lender doesn't offer a death discharge, it can still make a claim against your estate, like any other creditor. If your debt exceeds your assets, such as savings accounts, stocks, and other investments, your estate will be insolvent. That means there won't be money left for an inheritance for your loved ones, but you don't have to worry that your family will "inherit" your debt. If your estate doesn't have enough assets to cover the balance, your lender simply won't be repaid in full.
Private Student Loans
Non-governmental loans used to fund education, provided by banks or lenders, often with varying terms and interest rates.
What happens to cosigned or a spouse's loans?
What happens to cosigned loans or a spouse's loans?
If you're the primary borrower and your student loan cosigner dies, you'll still be responsible for paying private student loans. Most private lenders will allow you to continue making payments as usual. Some, however, have what's called an automatic default policy that says the entire loan balance is due immediately if the cosigner dies or goes bankrupt. In this situation, you may be able to get the lender to agree to a cosigner release, depending on your creditworthiness.
When the primary borrower dies, many private lenders will discharge the debt without going after the cosigner. In fact, federal law requires that lenders automatically release student loan cosigners if the primary borrower dies for any loan taken out after Nov. 20, 2018. For loans taken out before then, what happens will depend on the loan agreement.
In most circ*mstances, you won't be expected to repay your spouse's student loan if they die, but there are a few exceptions. If you cosigned for the debt, you could still be held responsible if the loan was taken out prior to Nov. 20, 2018, and the lender doesn't provide for an automatic release. If you live in one of the nine states that follow community property law -- Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin -- creditors could also pursue your spouse for the debt if it was incurred while you were married.
Remember: All of the above applies only to private student loans. Federal student loans are forgiven when the borrower dies.
Pay attention to student loan terms
You probably weren't thinking about what happens to your student loans when you die when you initially took on the debt. But it's important to be aware of how a lender would handle things should the worst occur.
With federal student loan debt, it's pretty simple: The debt is forgiven once survivors provide proof of death. But with private student loans, examine the fine print carefully. If you don't have a copy of the documents you signed, contact your lender or servicer. Be on the lookout for an automatic default policy if you have a cosigner since you could be responsible for repaying your loan immediately should they die.
FAQs
Student loans after death: FAQ
Can student loan debt be inherited?
Student loan debt can't be inherited, but if you have private student loans and the lender doesn't discharge the debt when the borrower dies, they could pursue money from the person's estate, which could reduce the size of an inheritance. Also, in some cases, a cosigner can be responsible for repaying a student loan after the borrower's death. In community property states, surviving spouses may be responsible for repaying their late spouse's private loans if they were taken out while they were married.
Is student debt forgiven upon death?
A federal student loan is forgiven or discharged when the borrower dies. Survivors will need to provide proof of the borrower's death to the servicer. Many private lenders also forgive student debt when the borrower dies, although policies will vary by lender.
Who inherits my student loans if I die?
No one inherits your student loans if you die, but private lenders can seek repayment from your estate, a cosigner (for loans taken out before Nov. 20, 2018), or your spouse if you took out the debt during your marriage and you live in a community property state.
What debts are forgiven at death?
Federal student debt is forgiven when the borrower dies. For most other types of debt, creditors can file a claim against the estate that will be sorted out in probate court. If the estate doesn't have sufficient resources to cover a person's debt, creditors will receive a reduced amount or nothing.
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