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What happens to my student loans after I die?

On Behalf of | Jan 15, 2020 | Estate Administration

Going to college has rapidly become more expensive. Along with the higher price tag, students take on substantially more debt to finance their education. While the low payments on student loans are somewhat manageable as you climb the ladder of success, it also takes a long time for those large balances to work down to zero.

The impact of student debt is affecting a large portion of our population with many people carrying student debt into their 40s, 50s, and beyond. In today’s world, due to the increased expense of a college education many people may be considering estate plans for the benefit of their families while they are still paying off student loan debt.

Here’s what you should know about student loan debt and how it might affect your estate plan.

Will my loans be paid through my estate?

It can be disheartening to think about the possibility of dying with outstanding debt. There are certain debts that could wipe out the assets you worked hard to set aside for your loved ones.

While federal student loans are not forgiven through debt solutions such as bankruptcy, it is fortunate that the government discharges federal student loans after your death. A federal student loan is discharged when you die and the student loan does not impact the assets of your estate.

What about my parents or spouse?

There are many reasons to be cautious about outstanding debt when planning your estate. Some debts that do not impact an estate could actually pass on to the spouse. Student loan debts can be especially challenging since in the case of PLUS loans, parents may have signed on the loan along with the student.

Thankfully, the repayment of a PLUS loan is not passed on to your estate after your death. Even in community property states, federal student loan debt is discharged. In the case of PLUS loans, they are discharged if either you or your parent has passed away.

What about private student loans?

Unfortunately, the outcome is not so certain when it comes to private student loans. You will need to read your loan documents carefully and consult with the lender to determine what happens with the loan if you pass away before paying it off, especially if you had a cosigner.

Student loan debt is an important consideration when developing your estate plan. If you have private student loans, pay particular attention to understand the impact they will make as you and your attorney create your personalized estate plan, including all of the appropriate estate planning documents for your circumstances.


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