No one plans for their student loans to outlive them. We all expect to have paid off loans for college or graduate school long before middle age, let alone within our lifetimes. But it’s important to have a grasp of what happens to student loans when you die. Not knowing the policy can cause you a lot of anxiety. Will the loan be wiped away? Will the burden fall on your parents or spouse? The answers depend on what kinds of loans you have.
If you die before your student loan is paid off, your loan will be discharged – but only if it’s a federal loan. Your family will not be responsible for repaying a federal student loan. With a private loan, it will also most likely be discharged, but in certain cases there could be complications. And if you had a cosigner, it’s more likely there will be complications.
According to EducationData.org, 6.2% of federal borrowers are 62 years of age and older. The average 62-year-old federal borrower owes $41,780 in federal educational debt, including Parent PLUS loans. So if you’re one of these older borrowers, getting the facts now may help put your mind at rest. Here’s what can happen to your loans in a variety of scenarios.
What Happens to Federal Student Loans?
If you took out student loans from the federal government, the loans will be discharged when you die. When a loan is discharged, the balance becomes zero and the government won’t try to collect on the loan.
There is currently no tax burden once loans are discharged as a result of death. However, this is only true until 2025, at which point this tax code expires and policies could change.
Also, your parent’s PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.
You’ll likely want to make sure that your loved ones have the information they need now—at a minimum, the name of your loan servicer and, ideally, your loan ID numbers and your Social Security number.
Family or friends would need to provide your loan servicer with that documentation to confirm the death, usually an original or copy of your death certificate. They can call your loan servicer to ask about the specific requirements.
The bottom line: If you have any kind of federal student loan, you don’t need to worry about your relatives being burdened with the debt if you pass away.
💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.
What Happens to Private Student Loans?
More than 93% of all student loan debt is made up of federal student loans, according to Educationdata.org. What happens to private student loans when you die? The rules are different than those covering federal student loans. It is possible that with a private student loan, someone will be pursued for repayment after you die.
The Consumer Financial Protection Bureau says, “Unlike federal student loans, there are no legal requirements to cancel private student loans for borrowers who die or become disabled. In certain cases, private lenders have special provisions to discharge loans.”
So yes, some private lenders will cancel the loan upon the loan holder’s death, but it typically depends on the type of loan and the laws in your state.
Make sure to read your private loan agreement carefully now to see what protections your lender offers. If you have questions, it might be wise to consult a lawyer.
In the case that your lender doesn’t discharge your loans after death, the lender would first try to collect the money from your estate. If you don’t have an estate, they would turn to your student loan cosigner, if you have one.
If there isn’t one, then the lender would likely try to collect from your spouse. Whether your spouse would actually be liable depends on the state in which you live. If you live in a community property state–Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin–and took out the student loan while you were married, your spouse could be responsible.
What Happens If You Have a Cosigner?
Federal student loans almost never involve a cosigner, but private loans often do in order to improve a borrower’s financial profile. Enterval Analytics said that in 2022, 90.78% of undergraduate private loans were cosigned.
A cosigner has agreed to pay the debt if you default, which means they will be just as responsible for the loan as you are. If you die, a private lender could seek to collect payment from the cosigner. However, some lenders may waive the remaining debt if the primary borrower (student) dies. Again, you need to check the policy.
If you have a loan with a cosigner and want to take this burden off of them, you could consider trying to refinance the loan in only your name. This could be an option if your credit, income, and employment history have improved since you took out the loan, and you can now qualify on your own.
It’s worth asking what happens if the situation is reversed: What if your cosigner dies? In some cases, your loan would go into “student loan auto-default,” meaning the lender would immediately require you to pay the full amount of the remaining loan, even if you’ve been making payments regularly until then.
If you cannot pay the full amount as requested, the holder on the loan could put you into this immediate default. That would harm your credit rating for a number of years.
However, not all banks will invoke the “auto-default” if your cosigner dies. Also, this depends on the bank being aware that the cosigner is no longer alive.
If you are in the terrible situation of knowing that your cosigner will die soon, you might want to be proactive to avoid the auto-default possibility. You may want to ask your lender for a release of the cosigner. Be aware that it might not be easy to obtain a release if your credit profile isn’t strong.
Recommended: Applying for a Student Loan Cosigner Release
What Can You Do to Protect Loved Ones?
It is pragmatic to worry about what happens to student loans when you die. To ensure that your spouse or cosigner doesn’t end up with a large debt burden in the event of that happening, one course of action is to pay off your student loans faster.
You can do this by increasing the amount you pay every month, going above your minimum monthly payment, or possibly shortening the payment term through refinancing.
Another option is to build a savings cushion that can be put toward your debt if you die.
How Student Loan Refinancing Can Help
Do student loans die with you? Not always. But there are things you can do now, including releasing any cosigners to make it less likely they’ll be pursued for the debt after your death. Refinancing your student loans may also be a good way to speed up repayment, leaving less of a potential obligation behind in case you die.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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