Federal Student Loans After Death
Without a Cosigner
If you still have federal student loans when you die, they will be discharged and your estate will not need to pay them. This includes Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Consolidation Loans and Federal Perkins Loans.
Someone who represents you, often a family member, will need to present proof of death before the debt is discharged. Such proof may include
- The original death certificate,
- A certified copy of the death certificate or
- An accurate and complete photocopy of either of the above
This proof must be submitted to the loan servicer. In the case of Federal Perkins Loans, proof would be submitted to the school, because the school is the lender. The exception would be where your school has appointed a loan servicer, in which case the proof would go to that loan servicer.
With a Cosigner
Federal student loans generally do not require a cosigner. Your rate for a federal student loan is not even dependent on your credit history. It is set by Congress. However, Direct PLUS loans are an exception. You cannot get a Direct PLUS loan with an adverse credit history, so you can seek an endorser, otherwise known as a cosigner, in order to qualify. If you die and you had an endorser on your loan, your Direct PLUS loan is still discharged.
Parent PLUS Loans
Parent PLUS loans are federal student loans, but the parent rather than the student is the responsible borrower. If the parent who borrowed the money or the student dies, the debt is dischargeable. However, if both parents took out the loan and just one dies, the surviving parent must pay the student loan assuming the student is still alive. Of course, proof of death must be submitted as for other federal student loan discharges.
Private Student Loans After Death
Without a Cosigner
The terms of private student loans are not nearly as forgiving as federal student loans, so whether or not your private student loans will be discharged when you die depends upon your student loan contract. Many lenders will forgive private student loans upon the death of the borrower, but if you are just at the stage of thinking about borrowing a private student loan, remember to check the terms regarding death and disability discharge. Remember that no one else is ever responsible for your debt, so if the borrower dies without paying off the student loan no one else can be responsible for repayment unless there is a cosigner or in some cases your spouse.
With a Cosigner
To take out a private student loan you must meet the lender’s credit requirements, which may require a cosigner. If your credit is subpar, you may still be able to get the loan with a cosigner. A cosigner is responsible for a debt if you don’t pay it, and it’s rare for a cosigner to be released from a private student loan. But what if you die? Unless the terms of the private student loan states that the cosigner will be released upon the death of the borrower, the cosigner is responsible to pay off your student loans when you die. Some financial institutions will discharge the debt even with a cosigner, but this is far from something you can assume. Both Sallie Mae and Wells Fargo are examples of financial institutions that will discharge student loan debt upon the death of the student and let the cosigner off the hook.
If your credit rating has improved, and you would like to relieve your cosigner from the responsibility of paying off your loan, you have options. With acceptable credit history, you may be able to refinance your private student loans in your own name without a cosigner with another lender. Of course, you could also refinance with a cosigner if you have no other option. Another possibility is to request that your cosigner be released, but 90% of these requests are rejected. Cosigning a student loan, particularly a private student loan, is a big commitment, and cosigners should not enter into the responsibility lightly.
Seeking Forgiveness For Private Student Loans
In some cases, private student loans can be forgiven or discharged. If you are concerned about leaving a student loan debt to someone who cosigned for you, or to a spouse, you can see if your loan qualifies for any type of forgiveness. The chances are slim as there are not many forgiveness programs for private student loans, but it’s worth looking into.
Marriage and Private Student Loans
If you have no cosigner but are married, and you have student loans when you die, whether or not your surviving spouse is responsible for paying your remaining debt depends upon the laws of your state and the type of loan. Of course, if you have a federal student loan or if the terms of your private student loan indicate that your student loan is discharged when you die, your spouse will not have to pay in any case.
But if you have a private student loan that is not dischargeable upon your death, you live in a community property state, and you borrowed the loan after you were married, your spouse may be responsible. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Other states are common law property states, where a surviving spouse is not usually responsible for debts taken out solely by the other spouse. Laws vary from state to state, so it is best to check with a good student loan lawyer in your location.
If you have federal student loans, they will be discharged when you die. However, if you have private student loans, whether or not your student loans will be discharged when you die and who will have to pay them (if anyone) depends on the terms of your loan agreement and the laws of your state. We hope this article has helped you understand what happens to student loans when you die and will make things just a bit easier for you during a difficult moment you or a loved one may be going through.
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.