What Happens to Parent PLUS Loans When You Die?

Parent PLUS Loans are automatically discharged when the loan servicer gets documentation that the parent who borrowed the loans has died.

The U.S. Department of Education writes off federal Parent PLUS Loans when the parent who signed the master promissory note dies. To get a discharge due to death, a family member or representative must send proof to the student loan servicer that the parent borrower has died. The proof of death can be:

• The original death certificate.

• A certified copy of the death certificate.

• An accurate and complete photocopy of one of those documents.

Surviving family members or the trustee can get the death certificate from the funeral home that handled the burial service or the state.

Related: Parent PLUS Loan Forgiveness

Until a few years, the IRS would treat the amount forgiven due to the parent borrower’s death as taxable income. But President Trump’s Tax Cuts and Jobs Act changed everything. All student loan forgiveness, including discharge due to the death of the borrower, is now free from income tax consequences at the federal level. This law will expire in 2025. The Biden administration, however, has stated that it is striving to make the change permanent.

Related: What Happens to Parent PLUS Loans When You Retire?

The responsibility to pay Parent PLUS Loans can’t be inherited or passed down to the parent borrower’s surviving spouse, the other parent, or the children for whom the loans were borrowed. All federal student loans are forgiven when the borrower dies. No one else will be held responsible for repayment.

Related: What Happens to Student Loans When You Die?

Private student loans, on the other hand, will become the cosigner’s responsibility when the primary borrower dies. Similarly, your spouse could be stuck having to make the loan payments if you live in one of the community property states.

Related: Are Student Loans Community Property?

So if you borrowed student loans from a private lender like SoFI or Sallie Mae, you might want to purchase a life insurance policy to protect your signer and family from having to pay back the debt.*

Other options include:

• Requesting a cosigner release after making several consecutive monthly payments.

• Refinancing the loans into your name alone.

• Transferring the loans to your child.

Depending on your credit score, you may even be able to refinance and get a lower interest rate and better loan terms.

Related: Can a Parent PLUS Loan Be Transferred to the Student?

Use an online marketplace like Credible to compare rates and loan terms with multiple lenders simultaneously.

*Purchasing life insurance to protect a cosigner is unnecessary for private student loan debt borrowed after Nov. 20, 2018. Federal law mandates that lenders must release the cosigner if the primary borrower dies for loans taken out after that date.

Parent PLUS Loans are forgiven when the parent or the child from whom they borrowed the loans dies. Your surviving family members can’t inherit the debt.

Before that day comes, there are other opportunities to get rid of your student loan debt. For example, the Education Department will forgive your loans if you work in public service for a decade or make payments for at least 20 years. They’ll also cancel up to $20 thousand of your federal loans if you earned less than $125 thousand annually during the pandemic. Read more about how to apply for loan forgiveness.

Let’s talk if you want to explore your forgiveness and repayment options. During our call, we’ll devise a strategy to help you fit your Parent PLUS Loans into your budget as you prepare for the next chapter of your life.

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