It is true that in most cases your student loans will be canceled upon your death; your loan balances will be written off, so that no one in your family becomes responsible for your debt after you leave. But there are situations where this will not happen. As with any type of debt, it’s important to know what happens to your worst-case student loans.
What happens to private student loans when you die?
Most private student loans can be canceled in the event of death as long as there are documents proving the death, usually a death certificate. However, lenders are not required to offer this waiver, so you may come across a lender who does not offer this option.
There could also be complications if you have a co-signer. Some businesses will only pay off a loan if the primary borrower dies. Navient, for example, has a discharge in the event of the death of the primary borrower. But if a co-signer dies, the other surviving borrower could be responsible for continuing payments, depending on who was borrowing the loan. The same is true for SoFi. In some cases, the co-signers may have to take responsibility for the loan even if the primary borrower dies.
Some rules are unclear depending on the loan you take out. For example, if a parent borrows for a child and the child dies, the parent could be responsible for the payments. Sometimes, if the parent dies, the child has to pay these payments.
What Happens to Federal Student Loans When You Die?
When you die, your federal student loans will be canceled. If your parent took out a parent PLUS loan and they die, or if you die, that loan will also be canceled. This means that you will not be responsible for these loans when a parent dies. In all cases, proof of death is required for this discharge to be accepted.
Frequently Asked Questions About Student Debt
Will my parents or spouse have to pay taxes on a paid-up student loan?
No. Your surviving family members are not subject to tax on paid-up student loan balances.
Do I have to pay my parents’ student loans if they die?
If your parent took out a private student loan on your behalf and died, you may be responsible for paying it back. If it was a federal student loan, it will be discharged. If the loans were for your parents’ use, you are not responsible for them and they will likely be released.
Do I have to pay my spouse’s student loans if they die?
If you were a co-signer on your spouse’s loan, you may be required to repay it in the event of death. However, it depends on the loan. For federal student loans, the loan will be forfeited in most cases. If you were a co-signer on their private student loan, you will need to contact the lender to find out how to avoid repaying the loan.
How do I report a death to a student loan officer?
If you have received letters from a student loan officer on behalf of a deceased person, you will need to contact that lender to report the death. Call the number on the letter and, if you have them handy, provide the account details so that it is easy for the customer service representative to find the account.
When calling, say the person is deceased and provide details of the death. The loan service representative will most likely request a copy of the death certificate by mail or email.
Record the details of your phone call, including who you spoke to and when you spoke to them. Make sure you know the deadline by which you need to submit the documents and get a timeline when you can expect a response regarding the discharge. Also ask what happens if it is denied so that you are prepared for other options.