Can Student Loans Be Transferred to Another Person?

Student loans are personal financial obligations tied directly to the individual borrower. In most cases, student loans cannot be directly transferred from one person to another. This principle applies consistently across both federal and private student loan types. The original borrower remains legally responsible for the debt.

Understanding Student Loan Obligations

Student loans are legally binding contracts between a borrower and a lender, formalized through a promissory note. The terms of this agreement are established based on the original borrower’s creditworthiness, income stability, and their promise to repay the debt. Lenders conduct an underwriting process to assess the risk associated with lending to a specific individual. This evaluation determines the loan’s approval and its interest rate.

Because the loan is a personal contractual agreement, lenders do not permit the original borrower’s legal obligation to be shifted to another party. The new party was not part of the initial underwriting process, meaning their financial standing was not evaluated. This non-transferability is consistent for both federal and private student loans.

Situations Often Confused with Transfer

Individuals often encounter scenarios that might appear to be a student loan transfer but are distinct financial processes. Understanding these differences can clarify the true nature of student loan obligations.

Refinancing with a New Borrower

Refinancing a student loan into the name of a different individual, such as a parent taking on a student’s debt, does not transfer the original loan. Instead, it involves the new borrower taking out an entirely new loan in their name, which is then used to pay off the original student loan. The original loan is subsequently closed, and the new borrower becomes solely responsible for the new debt under new terms and conditions. If federal student loans are refinanced into a private loan, the borrower will lose access to federal benefits such as income-driven repayment plans and loan forgiveness programs.

Co-signers

A co-signer on a student loan is another situation frequently mistaken for a transfer. A co-signer agrees to share equal responsibility for the loan from its inception. They are legally obligated to repay the debt if the primary borrower fails to do so, and their credit is affected by the loan’s performance from the start.

Death of the Borrower

The death of a borrower leads to the discharge or forgiveness of student loan debt, not a transfer to another individual. Federal student loans, including Parent PLUS loans, are typically discharged upon the death of the borrower, and the family is not responsible for repayment. For private student loans, discharge policies vary by lender; however, many private lenders also offer death discharge. Proof of death, such as a death certificate, is usually required to initiate this process.

Divorce and Student Loan Responsibility

In cases of divorce, a court decree might assign responsibility for student loan payments between ex-spouses, but this does not legally transfer the loan obligation from the original borrower to the lender. The person whose name is on the promissory note remains legally responsible to the lender for the debt. The divorce decree only governs the financial arrangement between the divorcing parties, meaning if the assigned spouse fails to pay, the original borrower is still accountable to the loan provider.

Parent PLUS Loans

Parent PLUS loans are federal loans taken out by parents to help finance their child’s education. The parent is the original borrower from the start, making them solely responsible for the loan’s repayment. The loan is already the parent’s obligation, and it cannot be transferred to the student.