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What Happens to Student Loans When You Die?

What Happens to Student Loans When You Die?
Nancy Bilyeau

Nancy Bilyeau

Updated March 29, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
It can take a long time to pay off a student loan. The average student borrower takes 20 years to pay off their student loan debt, with some professional graduates taking over 45 years to repay their student loans.With figures like that, some people may be driven to ask, “Is the only escape from student loans going to be my death?”The serious answer to that question is the end of your life is also the end of your student loan … most of the time.

What Happens to Federal Student Loans When You Die?

The majority of student loans are federal loans, and when you die, that federal loan will be “discharged” after the required proof of death is submitted to your loan server, says the Department of Education.When your student loan is discharged, it means that you no longer have any further obligation to repay the loan. So what happens to student loans when you die is the loan is no more, if it’s a federal loan. Acceptable documentation of the borrower's death includes an original death certificate, a certified copy of the death certificate, or an accurate and complete photocopy of one of those documents. What happens to a PLUS loan when the parent dies?  Your parent's PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die, according to the Department of Education.

What Happens to Your Private Student Loan When You Die?

When it comes to a private student loan, one obtained from a bank or other financial institution, there isn’t a universal rule for how lenders handle borrowers’ deaths.Many private lenders will discharge the loan when the student dies, but not all of them. You’ll need to check your loan agreement.Some private loans have a co-signer and this is where it gets complicated. A co-signer is just as responsible for the loan as the original student. If the student dies, the co-signer sometimes must repay the loan anyway.If the co-signer dies but the student is alive, the student could then be the sole one responsible for repayment of the private loan.Newer private loans have more protection. All loans taken out after Nov. 20, 2018, must release a co-signer if the student borrower dies, due to a provision in the Economic Growth, Regulatory Relief, and Consumer Protection Act.As for private parent student loans, some companies will require the parent to repay the loan even if the student dies. Others will discharge the loan. Again, check the policy.

What Can You Do to Protect Your Family?

Rather than take out loans, some students try to focus on scholarships, grants, and work-study.

Talk to Your Parent (Or Someone Else)

The most helpful thing a student-loan borrower can do is tell a family member they’ve prepared the necessary information just in case. And the most important is how to contact your loan servicer. If you have federal loans, write down who your servicer is and how to contact them so a family member will know where to send a death certificate. It’s the same for a private loan server.You could make a note of your account number and loan servicer’s contact information and save it alongside your important documents, like your birth certificate.

Consider Death Policies When Comparing Private Loans

If you’re in the market for a private loan, make it a priority that the lender will discharge all debt for both you and your co-signer.

Check Your Private Loan Policy

Read the fine print on what happens after death. Look for the death discharge policy. If you have a co-signer and the policy doesn’t include your co-signer, find out if you can get a special release to get their name off the loan if you die.

Consider Refinancing

What is student loan refinancing? you may ask. When you refinance, you submit an application to a private lender to take your federal loan or existing private loan and issue you a new loan. A student loan refinanced with a private servicer may produce payments that are smaller and a repayment time frame that is shorter, allowing you to pay off student loans faster. One of the other motivating factors to refinance is to sign with a lender that has better death discharge policies for you and any co-signer. Make sure your legal heir or parents would not be liable to pay out your loan should you die.Pay special attention to the co-signer release discharging debt for the co-signer in case of your death.There are disadvantages to student loan refinancing. One drawback to refinancing is that you no longer qualify for federal loan forgiveness programs, both ones that exist now and ones that may be created in the future. Should President Joe Biden decide to grant student loan forgiveness to Americans holding debt — $10,000 is the number often cited — you would be ineligible for it. Biden has set September 1st as the date when payments on federal student loans will officially resume.

The Takeaway 

If you have a federal student loan, then when you die, a family member or friend can submit proof of death to the loan server and it will be considered discharged. Private loans vary in their policies, with some requiring the loan to be repaid in full by your estate or a co-signer to continue to make payments.Refinancing a private loan to obtain better death discharge policies is one course of action. You can find and compare student loan rates on Lantern by SoFi.
Photo credit: iStock/LaylaBirdSOLC0222038

About the Author

Nancy Bilyeau

Nancy Bilyeau

Nancy Bilyeau writes about student loans, mortgages, car insurance, medical debt and many other finance topics for Lantern. A veteran of the magazine business, she has edited stories on personal finance for Good Housekeeping and DuJour magazines and has written articles for The Wall Street Journal, Readers' Digest, Parade, Town & Country and Lifetime/A&E, among others. She is a graduate of the University of Michigan.
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