When someone dies, most of the time, their student loans are forgiven. But sometimes, it does not happen. It is important to be watchful of this because if you die with loans, then your family might not be able to pay them off.
When you die, what happens to your private student loan?
A lot of the population who take out private loans may be able to get their debt forgiven after they die. Usually, it is a death certificate that you will need as proof of the death. But some lenders won’t offer this option, so make sure you ask if possible!
If you have a co-signer, there is a chance that they will need to take on the responsibility of the loan even if the primary borrower dies. Some companies will carry out a loan only if the primary borrower dies, but this might not be true for other companies.
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Some rules depend on the loan you take out. If a parent adopts a child and the child dies, then the parent might have to pay back that money, or if both die, then sometimes, but not always, it falls to the child.
What happens to federal student loans when you die?
If your parent takes out the PLUS loan and dies, or if you die, then that loan will be discharged. You won’t have to pay for that loan when a parent dies. To get this discharge, you must show proof of death.
Frequently asked questions
Will my parents or spouse have to pay taxes on a student loan if the loan is discharged?
No. Your family members are not responsible for paying off your student loan debt when you die.
Do I need to pay my parents’ student loans if they die?
Your parent may have taken out a loan for your education. If they die, it is possible that you will need to pay the loan back. This does not happen for federal loans because they are discharged. However, if the loans were taken out by your parents, you won’t be responsible, and most likely, these loans will be discharged too.
Can I pay my spouse’s student loans if they die?
Most likely, if you are a co-signer on your spouse’s loan, you will not need to repay it when they die. But for federal student loans and private student loans, the lender might make you pay for the loan. If this is the case, you can reach them and ask how to get out of paying the loan.
How do I report a death to my student loan services?
If you get a letter from student loan services about someone who passed away, call them. They might not know as they work for the person who died. Tell them your name, and then tell them your account details.
If someone has died, tell the person on the phone. The loan company will need to know. They might ask for a copy of the death certificate, or they might not.
Be sure to write down who you talked to and when. You need to know the deadline for submitting the paperwork and when you can expect a response about the discharge. Ask what happens if it gets denied, so you are ready for other options.