When you die, your student loans are usually discharged (forgiven) and your family members are not responsible for the debt. However, there are situations where a student loan borrower’s family or cosigner may still have to pay the balance of the debt.
Federal student loans are always discharged in full when you die.
Private student loans are often discharged due to death with appropriate documentation (like a death certificate), but this isn’t always the case. Private lenders aren’t required by law to offer a death discharge on student loans, so this depends on the individual loan servicer.
If the cosigner on a private student loan dies, the surviving borrower may still be responsible for that student loan repayment.
Here's what you need to know about your student loan debt and death.
Disclaimer: This post contains general information and should not be taken as legal advice. For legal advice that pertains to your situation, schedule a free consultation with me. Also, I recommend some products with affiliate links in this post, but my opinion has not been affected.
What happens to private student loans when you die?
Most private student loans will be forgiven if the primary borrower dies. However, the lender’s policies will determine this for sure.
You can find your lender's policies concerning a loan discharge by reviewing the promissory note for the loan terms.
For instance, Sallie Mae will discharge student loans if the borrower dies. But other lender policies may require the cosigner to continue making student loan payments if the primary borrower dies.
In my experience, here's what happens to private student loans when a borrower dies:
- The loans will be placed into automatic default
- The entire loan balance will become due
- The private lender will want to collect on its investment (the loan)
Unfortunately, after the death of the borrower, private lenders may attempt to collect the entire balance from the deceased borrower's estate (probate).
What happens to private student loans when a cosigner dies? In most cases, the primary borrower will still be responsible for paying off their private student loans even after a cosigner dies. Again, you’ll need to check your loan’s promissory note to be sure.
Both Navient and SoFi require borrowers to continue paying their loans after a cosigner passes away. Missed payments and default status will still appear on the primary borrower’s credit history and impact their credit score.
Read More: Forbearance vs. Deferment Explained
What happens to federal student loans when you die?
Your entire federal student loan debt will be forgiven when you die.
Unlike a mortgage or car loan, the U.S. Department of Education forgives federal student loan debt at the borrower's death by issuing a “discharge due to death.”
This loan forgiveness is not automatic; a family member must send in an official proof of death to qualify for discharge due to death.
Forgiveness of student loans after death covers all federal student loan types:
- Direct Loans
- Direct Consolidation Loans
- Direct PLUS Loans (Parent loans)
- Federal Perkins Loans
- Federal Family Education Loans (FFEL)
- Stafford Loans
Parent Plus loans are discharged both when the parent dies or when the student dies.
Although your federal student debt doesn't go away after 7 years, your spouse or children will not be responsible for your federal student loans when you die.
Can you inherit student loan debt?
You cannot inherit student loan debt. Student loans are not transferred to next of kin, including children or spouses.
But if your parent/guardian had private student loans at the time of their death, the private lender may try to recover the remaining loan balance from the deceased’s estate in probate.
This would decrease the total amount of the inheritance you receive, even though the loans aren’t your responsibility.
What happens to my Navient loan if I die? Private student loans through Navient may be forgiven if you die, but this depends on the type of loan you have. Federal student loans with Navient will be forgiven if you die (like all federal student loans).
Being left with another person’s student loan debt after their death is another reason why you should know your rights before you cosign a loan.
How to get a "death discharge" for federal student loan debt
The federal government makes it easy to get the deceased borrower's remaining debt forgiven. You simply need to provide a proof of death.
To get federal student loan forgiveness due to death, a surviving spouse or family member must send proof of death to each of the deceased’s student loan servicers.
Proof of death could be any one of the following 3 examples:
- the original death certificate
- a certified copy of the death certificate
- an accurate and complete photocopy of the death certificate
To find out which companies service a deceased borrowers’ student loans, visit the Federal Student Aid website, then check the borrowers’ credit report. Any student loan listed on your credit report that's not listed on the FSA website is likely a private student loan.
3 ways to protect your cosigner from getting stuck with your loans
Here are 3 options to protect your cosigner from being stuck with your student loan debt after you die:
- Cosigner release: Each lender has its own criteria you need to meet before they grant a cosigner release. Typically, the primary borrower needs to make several consecutive on-time payments and show they have the income to afford the payments on their own. Only then might a lender grant a cosigner release.
- Student loan refinancing: If your lender doesn't offer a cosigner release, refinancing your private loans with a new lender can provide a clear path towards a cosigner release. Note: You'll need a great credit score to get a great interest rate without a cosigner. If you’re interested in a refinance loan, look for high-quality and reliable lenders like CommonBond, SoFi, or LendKey.
- Get life insurance: If you don't want your loved ones to be stuck with your private student loans, get a term life insurance policy or some other type of insurance specifically to repay your remaining debt. The beneficiary will get money to pay back your student loan creditors.
Read More: Private Student Loan Forgiveness Programs
Will my spouse be responsible for my student loan debt when I die?
Neither federal student loan debt nor private student loan debt automatically transfers to your spouse when you die. However, your spouse may be responsible for the debt if you live in a community property state and you took out loans during your marriage.
Federal student loan debt goes away when the borrower dies.
Private lenders typically check to see if the deceased borrower has an estate with assets. Generally, the lender will first try to collect from the estate to repay the student debt.
After that, if a balance remains, the lender will turn to the cosigner to keep making the monthly payments.
If there is no cosigner, the lender may turn to your spouse, but only if 2 things are true.
First, the spouse must live in a community property state:
- Alaska (optional community property)
- New Mexico
Second, the borrower must have taken out the loans during the marriage. Your spouse usually isn't liable for student loans you borrowed before you married.
If you cosigned or borrowed a private loan, consider sheltering your assets in a trust or getting an insurance policy beforehand to help pay for the loans after death.
Will my parents or spouse have to pay taxes on a discharged student loan? No, as of 2017, no one has to pay taxes on student loans discharged due to death.
Recent changes to tax laws impacting student loans
Before 2017, student loans discharged due to death or total and permanent disability were subject to income taxes. As a result, your spouse or co-signer could face a huge tax bill even though the debt itself was wiped out.
That changed when Congress passed the Tax Cuts and Job Act. Signed into law by President Donald Trump in 2017, this act made student loan discharge due to death non-taxable. In other words, the IRS could no longer treat student loans discharged due to death or disability as taxable income.
Dealing with death and debt? Let’s talk.
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