What Happens to Student Loans When Someone Dies?
Understand the financial implications of a borrower's death on student loans, including discharge rules, documentation, and who is responsible.
Navigating financial responsibilities after the death of a loved one can be challenging, particularly when student loans are involved. The way student loans are handled upon a borrower’s passing is not uniform and depends significantly on the type of loan. Understanding these distinctions is important for family members and representatives managing the deceased’s affairs, as obligations can vary from complete discharge to ongoing repayment.
Federal Student Loan Discharge
Federal student loans generally offer a discharge provision upon the death of the borrower, meaning the remaining balance is forgiven. This policy applies to Direct Loans, including subsidized, unsubsidized, and PLUS loans for students. Federal Family Education Loan (FFEL) Program loans and Federal Perkins Loans are also eligible for this discharge.
A Parent PLUS loan, a federal loan taken out by a parent for a student’s education, is discharged if either the parent borrower or the student for whom the loan was taken dies. When a federal student loan is discharged due to death, the remaining loan balance is entirely forgiven. This discharge is not considered taxable income for the estate or the borrower’s heirs for discharges occurring between January 1, 2018, and December 31, 2025.
Private Student Loan Obligations
Private student loans operate differently from federal loans regarding death discharge policies. Unlike federal loans, private student loans usually do not have an automatic discharge provision upon the borrower’s death. The terms and conditions for death discharge, if any, are determined by the individual loan agreement and the specific lender’s policy.
Many private lenders may offer discharge policies similar to federal student loans, but this is not a universal practice. If a private loan agreement does not include a specific death discharge clause, the outstanding balance generally becomes an obligation of the deceased borrower’s estate. Reviewing the specific loan documents for any private student loans is essential to understand the lender’s stance on this matter.
Required Documentation for Discharge
Initiating a student loan discharge request due to death requires specific documentation. The primary document needed is a certified copy of the death certificate. This document serves as official proof of death, which servicers and lenders require to confirm the borrower’s death before processing any discharge.
In addition to the death certificate, provide the deceased borrower’s full name, Social Security Number, and loan account number(s). Contact information for the person requesting the discharge, such as an executor or next of kin, is also typically required. A certified copy of a death certificate can usually be obtained from the local or state vital records office or through the funeral home. Obtaining multiple certified copies is often advisable, as various institutions may require them for different financial matters.
Applying for Loan Discharge
Once necessary documentation has been gathered, submit the discharge request to the relevant loan servicer or lender. Begin by contacting the loan servicer directly, often through a designated phone number or department, to inform them of the borrower’s death. They will provide specific instructions on how to proceed.
Documentation, such as the certified death certificate, can typically be submitted via mail, online portals, or fax. Follow the servicer’s instructions precisely to avoid delays. After submission, the servicer will acknowledge receipt and begin processing the request, which may take some time. Keep copies of all submitted documents and records of communication for personal records throughout this process.
Responsibility for Undischarged Loans
For student loans that do not qualify for discharge upon the borrower’s death, responsibility for the debt must be determined. If a private student loan has a co-signer and is not discharged, the co-signer generally remains legally obligated to repay the full outstanding balance. This is a common arrangement with private loans, where the co-signer’s creditworthiness helps secure the loan.
The deceased borrower’s estate is primarily responsible for any loans not discharged. This means the estate’s assets may be used to satisfy the debt before any remaining assets are distributed to heirs. Heirs are generally not personally liable for a deceased person’s debts unless they were a co-signer or the debt is secured by inherited property. In community property states, a surviving spouse might be responsible for private loans taken out during the marriage, even if not a co-signer.