What Happens to Student Loans When You Die?

Quick Answer

If you have federal student loans, they'll be discharged upon your death. But if you have private student loans, policies can vary depending on the lender and whether you have a cosigner on your loans.

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If you die, some of your creditors may go after your estate to receive payment, which can impact your heirs. Student loans, however, are a unique case, and in most cases, they're usually discharged.

But the type of student loans you have may impact what happens when you pass away, particularly if you have a cosigner on the debt. Here's what you need to know.

What Happens to Federal Student Loans When You Die?

When federal student loan borrowers die, the Education Department will cancel their student loan debt. To make that happen, though, their loved ones must submit proof of the borrower's death to their federal loan servicer.

This can be in the form of an original death certificate, a certified copy of the death certificate or an accurate and complete photocopy of the original or certified copy.

What Happens to Parent PLUS Loans When You Die?

As with loans for college students, Parent PLUS Loans are forgiven if the borrower dies. Additionally, they're dischargeable if the student for whom they were taken out dies. In this case, the parent would need to provide the proper documentation to their loan servicer.

What Happens to Private Student Loans When You Die?

While the policy for death-related discharge of federal student loans is straightforward, that's not the case for private student loan borrowers.

For the most part, private lenders will cancel the debt if the borrower dies. Some lenders, however, may make that decision on a case-by-case basis. Regardless of the outcome, the lender may require a death certificate or something similar to complete the request.

Where things get really tricky is if you had a cosigner help you get approved for the loan. If you received the loan after Nov. 20, 2018, federal law requires private lenders to release cosigners from their obligation to pay back the debt.

But if the loan was disbursed before that date, discharge occurs based on the lender's discretion. As a result, it's a good idea to review the loan agreement to get a better understanding of what your lender's policy is.

Will My Family Pay Taxes on My Discharged Student Loans if I Die?

Fortunately, no. The Tax Cuts and Jobs Act, which was passed in 2017, includes that student loans that have been discharged due to death are exempt from federal taxes. The same is true if the borrower becomes permanently disabled and qualifies for cancellation as a result of their disability. This provision is in effect until the 2025 tax year, though Congress has the ability to extend it beyond that year.

One thing to note is that, while student loan forgiveness may be exempt from federal taxes, some states may tax the forgiven debt, so consult with a tax professional to understand the laws for your state.

What to Do if You're Feeling Overwhelmed With Student Loan Debt Now

If your student loans are difficult to manage and you're concerned about passing that burden on to your loved ones, here are some steps you can take now to obtain some relief:

  • Get on an income-driven repayment plan. If you have federal loans, an income-driven repayment plan can reduce your monthly payment to a more manageable level that's based on your discretionary income. You'll need to recertify your income every year to stay on the plan you choose, but it can provide you with much-needed relief when you need it the most. Additionally, you can qualify for forgiveness of your remaining balance after 20 or 25 years.
  • Request deferment or forbearance. Whether you have federal or private student loans, you may be able to get on a short-term deferment or forbearance plan. This may give you a break for only a few months, but that's still a little time to figure things out.
  • Request a modified payment plan. If you have private student loans, you may be able to request a modification to your repayment plan so that your monthly payments are more affordable.
  • Ask for help. If your financial situation is dire, you may be able to obtain financial assistance in other areas of your life, such as unemployment benefits, SNAP benefits and more. There may also be nonprofit organizations in your area that can help you with immediate financial assistance. Search online for potential solutions, or call 211.

The Bottom Line

Student loan forgiveness in the event of death is available for all federal student loan borrowers, but that may not be the case for some private student loan borrowers. If a loved one has recently passed away and they had federal student loans, be sure to provide their loan servicer with the proper documentation to complete the discharge process.

If they had private student loans, contact their lender to get more information about their policy. If you have private student loans, check your loan agreement or contact your lender's customer service team to get an idea of what their policy is, and consider refinancing the loan if the policy may force your loved ones to pay back your debt even after you're gone.