Taking out student loans means you agree to repay them. But you might have questions about what happens to student loans when you die. Specifically, you might wonder whether your spouse or family members will be obligated to repay them on your behalf.
Federal student loans are discharged when a borrower passes away. If you have private student loans, the terms of the loan contract determine how your loans are handled upon death.
If you’re concerned about leaving a loved one with your debt, here’s a closer look at what can happen to student loans if you pass away.
In this guide:
- What happens to federal student loans when you die?
- What happens to private student loans when you die?
- What happens to student loans when you die and are married?
- How to protect your family in the event of your death
What happens to federal student loans when you die?
Federal student loans are discharged when you die, and acceptable proof of death is submitted to the loan servicer. Student loan discharge means you no longer have any obligation to repay the loan.
To have federal student loans discharged due to the borrower’s death, someone must present appropriate documentation to the loan servicer. The loan servicer may specify what’s needed, and the list can include:
- An original death certificate
- A certified copy of the death certificate
- An accurate or complete photocopy of either of these documents
The Department of Education doesn’t offer a detailed overview of how to apply for loan discharge. Contact the loan servicer to learn how to have someone’s federal student loans discharged after they die. For Perkins Loans, contact the school that made the loan or the school’s designated loan servicer.
Previously, federal student loan debt discharged due to death was taxable income. The 2017 Tax Cuts and Jobs Act changed the tax code to allow for tax-free discharges of federal student loans when the borrower dies. This provision expires at the end of 2025, and there is no guarantee that Congress will extend it.
States do not necessarily conform with federal tax law. Although most states seem to exempt student loan debt amounts, which are discharged due to death or disability, you should check with your tax advisor to make sure.
What happens to Parent PLUS loans when you or your parent die?
The federal Parent PLUS loan program allows parents to take out loans on behalf of eligible undergraduate students. Parent PLUS loans are eligible for discharge due to the death of the student or the parent.
The Department of Education does not pass the responsibility for paying those loans on to students. Submit acceptable proof of death to the loan servicer to apply for discharge of those loans.
Parent PLUS loans are protected by the Tax Cuts and Jobs Act provision like other federal student loans. That means your parents will not owe taxes on loans they take out on your behalf if you pass away, nor will you owe taxes on discharged loans if they die.
How to notify a federal loan servicer of a borrower’s death
When a federal student loan borrower dies, the student loan servicer must be notified to apply for a discharge in case of death. Suppose you’re seeking discharge of loans on behalf of someone else and don’t know who services the loan. In that case, there are a few ways to get this information:
- Check one of their previous loan statements if you have access to them
- Contact the school that disbursed their financial aid
- Reach out to loan servicers individually. If you have the borrower’s login at studentaid.gov, you can log in and check there for the loan servicer. Otherwise, the Department of Education maintains a list of federal loan servicers with their contact information.
Tell the loan servicer that the borrower has died and ask how to get the loans discharged. Keep records of each conversation and note when you send in the required documents in case you encounter an issue with the discharge process later.
What happens to private student loans when you die?
Whether private student loans are discharged when a borrower dies can depend on whose name is on the loan. If you took out the loan without a cosigner, the lender might discharge the outstanding amount when you pass away. However, lenders are not required to offer automatic discharge.
If your loan has a cosigner, ask your lender what happens to private student loans when you die. A cosigner is legally responsible for loans taken out with someone else, even if they’re not the ones making payments on the debt.
When loans are not discharged at death, the lender may seek repayment from assets from the decedent’s estate. If the private loans are discharged upon death, the estate will not have to pay federal taxes on the balance, as federal and private student loans are covered under the 2017 Tax Cuts and Jobs Act. Check with your tax advisor for state tax rules.
Here’s how some popular private student loan lenders handle discharge due to death.
|Lender||Discharge (No Cosigner)||Discharge (Cosigner)|
|Ascent||Ascent college loans will be forgiven if the borrower dies or becomes totally and permanently disabled.||The loan is not forgiven in cases where the cosigner dies or becomes totally or permanently disabled.|
|College Ave||If the student borrower dies or suffers a permanent disability, the loan is forgiven.||If the borrower passes away, they can forgive the loan, and the cosigner will not be responsible.|
|Discover||Discover discharges loans due to death on a case-by-case basis.||Discover discharges cosigners from student loans due to death on a case-by-case basis.|
|Earnest||In the unfortunate event of death or total and permanent disability, Earnest will discharge all student loans.||There are circumstances where a loan could qualify for forgiveness, including the unfortunate event of death for the student or the parent.|
|Funding U||Upon proper notification to the servicer of the borrower’s death, all loan principal and interest will be forgiven.||Funding U does not require cosigners for private student loans.|
|Sallie Mae||If a student dies or becomes permanently and totally disabled, Sallie Mae will waive the current balance.||Decisions for cosigner release due to death are made on a case-by-case basis.|
|SoFi||If the primary borrower (student) dies during school or repayment, the remaining balance of the loan is forgiven.||If the co-signer dies, the student is still responsible for the balance on the loan. Co-signers can contact customer service to discuss possible discharge options if the student dies.|
Note: Older loans may have had different rules. Check with your lender for details about your specific loan.
What happens to private parent student loans when a student or a parent dies?
The lender’s policies determine whether private parent student loans can be discharged if the parent or the student dies. Earnest, for example, will consider discharging loans if the parent or the student passes away. Discover and Sallie Mae may also offer discharge due to death.
If your lender’s website doesn’t specify what happens to loans taken out by a parent, ask the lender if a discharge is available and how it works.
What happens to cosigned private student loans when you die?
For many borrowers, a cosigner is necessary to get approved for private student loans and to qualify for the most favorable interest rates. Whether your cosigner will be left with your loans if you die can depend on when they were taken out.
The 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act was passed to enhance consumer protections while easing some of the regulations instituted by the Dodd-Frank Act. It included two major changes to private student loans. Under the act, private lenders:
- Cannot declare a private student loan to be in default or otherwise accelerate the debt due to the death of a cosigner
- Must release cosigners from an obligation to repay loans if the borrower dies
These rules apply to private student loans taken out 180 days after the act was finalized in Congress. So if you took out private student loans with a cosigner after November 20, 2018, your cosigner would not be on the hook for those loans if you pass away.
If you took out private loans before that date, reach out to your lender directly to ask how your cosigner may be affected if you die. If a cosigner is still required to pay, they could risk credit score damage or a creditor lawsuit if they fail to meet that obligation.
How to notify a private loan provider of a borrower’s death
Contact the lender to discuss your options for discharge due to the borrower’s death. The process can vary by lender. Similar to the discharge of federal loans, you will need to provide a death certificate or other documentation.
You might be able to upload the required documentation online or be asked to mail it in.
What happens to student loans when you die and are married?
Federal student loans are discharged after submitting appropriate documentation upon death, regardless of marital status.
If your spouse co-signed your private loans and they were made after 2018, the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act applies, and the loan should be discharged upon death of the borrower.
You might be responsible for repaying a deceased spouse’s private student loans if you live in a community property state—even if you didn’t cosign. In community property states, debts taken out after the marriage are owed by both spouses, even if only one spouse is listed as the borrower. However, if the lender’s policy is that the loan is discharged upon death of the borrower, it will still be discharged in a community property state.
If the debts were taken out before the marriage by one spouse, then the surviving spouse may have no responsibility for them, even if they live in a community property state. Whether those debts get attached to the deceased person’s estate or forgiven depends on the lender.
How to protect your family in the event of your death
If you’re concerned about leaving your loved ones with your student loan debt, there are a few things you can do to protect them.
- Keep good records. Create a file folder to store your loan paperwork with your lender’s contact information to make it easier for your survivors to initiate the discharge process if something happens to you.
- Understand your lender’s policy. If you can’t find the policy online, call or email the lender with your questions. If your lender doesn’t offer discharge at death, you can weigh the benefits of refinancing to a lender that does.
- Invest in life insurance. A life insurance policy provides a death benefit to your loved ones that they can use to pay outstanding debts. It’s possible to get life insurance quotes online, and the younger and healthier you are, the lower your premiums are likely to be.
Is refinancing student loans to a lender that does discharge after death smart?
Refinancing means taking out a new loan to repay your existing loans, which can reduce monthly payments or save money on interest. But refinancing federal student loans into private loans can mean losing discharge protection.
Refinancing private student loans could save money and offer another benefit if your new lender offers discharge after death. In addition to comparing interest rates and loan terms, base your choice of lender on whether discharge at death is available for refinanced loans.
If you are married or have children, you may not want them to be burdened with your student debt if you die. You may also want to protect the cosigner of your loan. Some lenders do allow removal of the cosigner from the loan if you meet certain criteria.
You can also consider refinancing a cosigned loan into your name alone, but it could create a shared financial obligation if you live in a community property state. Before refinancing, understand the circumstances in which discharge due to death is offered. That can help you decide if it’s the right move for managing student loans.
>> Read More: Impact of student loan debt