Does College Debt Get Passed Down?

Does college debt get passed down to family members after a borrower’s death? The answer depends on the type of loan. Understanding these distinctions helps families navigate potential financial obligations.

Federal Student Loans After Death

Federal student loans are discharged upon the death of the borrower. This policy applies to Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Federal Perkins Loans. When a borrower dies, their federal student loan debt is forgiven.

This discharge means the debt does not become the responsibility of the borrower’s estate, spouse, or other family members. Parent PLUS Loans also qualify for discharge if the student for whom the loan was taken dies, or if the parent borrower dies. A death certificate must be provided to the loan servicer to initiate this process.

Private Student Loans After Death

Private student loans do not offer automatic discharge upon the borrower’s death. Policies vary significantly among lenders, and many do not include a death discharge clause. This means the outstanding balance may still need to be repaid after the borrower’s death.

If a private loan lacks a death discharge policy, the borrower’s estate is responsible for the debt. The estate’s assets, such as bank accounts or property, may be used to cover the outstanding balance. If the estate lacks sufficient assets, the loan may go unpaid, depending on state probate laws and creditor claims.

Some private lenders may offer hardship programs or discretionary discharge options, but these are not guaranteed. Families should review the original loan agreement and contact the private lender directly to understand their specific policies.

Co-signer and Spousal Responsibilities

Student loan debt responsibility after a borrower’s death can extend to co-signers and, in certain circumstances, spouses. For federal student loans, co-signers are discharged from responsibility upon the borrower’s death.

For private student loans, if a co-signer exists, that individual remains legally obligated to repay the outstanding balance after the primary borrower’s death. The co-signer assumes full responsibility for the debt unless the lender’s policy states otherwise.

A surviving spouse is generally not liable for their deceased partner’s individual student loan debt unless they co-signed the loan. In common law property states, debts incurred by one spouse remain that spouse’s sole responsibility. The surviving spouse’s personal assets are usually protected.

In community property states, the situation is more complex. Assets and debts incurred during the marriage are considered community obligations. This means community assets, such as jointly held bank accounts or real estate, might be subject to collection by creditors, even if the surviving spouse did not co-sign. The applicability of community property laws to student loan debt after death varies by state.

Discharging Student Loan Debt Upon Death

To discharge eligible student loan debt upon a borrower’s death, specific steps are involved. A family member, the executor of the deceased’s estate, or another authorized representative reports the death to the relevant loan servicer or lender.

An original or certified copy of the death certificate is required. For federal loans, this certificate is sent to the loan servicer, who verifies the information and processes the discharge, adjusting the loan balance to zero.

For private loans, the process is similar, but the outcome is not guaranteed. The death certificate is submitted to the private lender, who reviews their policy. If dischargeable, they process forgiveness; otherwise, they notify the estate or co-signer of the remaining obligation.

After submission, expect confirmation from the loan servicer or lender regarding the loan’s status, indicating if it has been discharged or if further action is needed.