What Happens to Student Loan Debt When You Die?

Everything you need to know about student loan debt when you die...

what happens to student loan debt when you die

Here’s the Deal on Student Loan Debt After You “Kick the Can”

There’s no denying that student loan debt has become one of the most crippling financial barriers for Americans in the 21st century.

It’s an impossible conundrum: in order to procure gainful employment with upward mobility, you have to attend college, but in order to attend college, the overwhelming majority of students must take out tens of thousands of dollars in loans.

What exactly are the implications of those student loans, though?

A recent survey found that 73% of student loan borrowers do not know what happens to their loans if they die before the money has been repaid. Of course, this isn’t all that surprising considering how difficult discussions surrounding death can be for most people.

Still, it’s important to understand what would happen in the case of this eventuality, particularly when more and more people are saddled with student loans well into their 60s.

Assessing The Debt Crisis

First and foremost, it’s important to understand just how pervasive the student debt issue really is. In the United States, 44 million borrowers owe $1.5 trillion collectively; for those who graduated college in 2016, the average amount owed in student loan debt totaled more than $37,000.

The simple fact is, that amount of money takes time to pay off. This is especially true for those just entering the workforce and trying to juggle other bills at the same time. That translates to decades of debt, which means that there’s no telling what might happen to you before your loans are fully repaid.

In turn, it’s better to educate yourself about exactly what would happen to those loans if you were to die sooner than later.

Different Loans, Different Death Policies

Unsurprisingly, different loan providers have different methods of handling the death of a borrower. If all of your loans are through the federal government, they will be cleared in the event of your death through a “death discharge” when a certificate is provided.

This is also the case with Parent PLUS loans; if either yourself or your parent who co-signed the loan passes away, the debt will be forgiven. Things get a bit more tricky when it comes to private loan providers.

Almost every private provider has a different policy when it comes to the death of a borrower. Some will offer a death discharge on a case by case basis, others will automatically send the loans into default. What’s more, you might have a hard time finding your provider’s policy on death in your terms as they’re not usually offered up readily.

Your best bet is to contact your provider about their specific policy, and even have them send it to you in writing, if possible.

Protecting Yourself and Your Family

The last thing you want is for your family to be saddled with your student loan debt if you were to die. Because of this, it’s a good idea to prepare your family for how to handle your loans in the event of your death, as uncomfortable or morbid as that may feel.

First and foremost, arm yourself with knowledge, and share that knowledge with your family. Take the time to thoroughly understand your loans’ terms, and then explain them in writing to your family. Additionally, write down the steps that your loved ones will need to take to manage your loans if you die. Once this packet of information is compiled, give it to your family for safe keeping. Chances are, they’ll never need to use it, but it’s important to prepare them either way.

If you find that your loans won’t be wiped away in the event of your death and that your family will have to take on that burden, consider investing in life insurance. This will keep your loved ones from having to take on the burden of your debt.

Even better, because your family will probably never need the life insurance money to cover your loans, you can invest in a policy that provides passive income for you in retirement. Basically, life insurance will give you peace of mind and set you up for success in the future.

Student loans are a sore subject for many Americans, and no one wants to grapple with the idea of their own death. Taking the time now to explore precisely what will happen to your student loans if you die relieves a great potential burden from your family, so do a little research and sleep a little easier at night.

What Happens to Student Loan Debt When You Die?
Brian Allen has been helping people make smarter financial decisions for over 10 years. As the Editor-in-Chief for Goloans, Brian writes about sage financial advice, "how to" articles, and reviews about lenders and creditors.