What happens to student loan debt when a borrower dies?

Dealing with the uncertainties around student loan debt when a borrower dies can be challenging for both the borrower and their loved ones. It is essential to understand the financial implications of student loans for you and your family. Whether you are a family member trying to navigate a loved one’s financial situation, a borrower concerned about the future of your debt, or someone planning for the unexpected, this guide will help clarify your options and responsibilities.

Understanding Your Options: Managing Student Loan Debt After a Borrower’s Death

When a student loan borrower dies, their federal student loan debt may be discharged or forgiven, while private student loan debt may be passed on to the borrower’s estate. However, if the borrower had a cosigner on a private student loan, the cosigner may be responsible for the remaining balance.

This blog post offers a comprehensive overview of what happens to student loan debt when a borrower dies, and the options available to both borrowers and affected parties such as family members, cosigners, or executors. Navigating student loan debt in such circumstances can be complex, making it crucial to understand your options and rights. This blog post aims to equip you with the necessary information to make informed decisions and handle this challenging situation. While each case is unique, we hope the information presented here will empower you to feel more confident and prepared as you tackle this issue.

What Happens to Your Student Loan Debt When You Die

Losing a loved one is a difficult experience, and dealing with their debts and financial obligations can make it even more stressful. If your loved one had student loan debt, you may be wondering what happens to that debt now that they’re gone. The answer largely depends on whether the debt was federal or private.

For federal student loans, the general rule is that the debt is discharged (or forgiven) upon the borrower’s death. This means that the borrower’s estate won’t be responsible for repaying the remaining balance. This applies to both subsidized and unsubsidized loans, as well as loans in default. However, it’s important to note that if the borrower had a cosigner on their loan, the cosigner may still be responsible for repaying the remaining balance.

On the other hand, private student loans may or may not be discharged depending on the lender’s policies. Some lenders may choose to discharge the loan entirely, while others may require the borrower’s estate to repay the remaining balance. If the borrower had a cosigner on the loan, the cosigner may also be responsible for repaying the remaining balance. It’s important to check with the specific lender to determine their policies on loan discharge after death.

Federal Student Loan Discharge

To have the federal student loan discharged, the executor or personal representative of the borrower’s estate will need to provide proof of the borrower’s death to the loan servicer. This may include a death certificate or other documentation. Once the loan servicer receives the proof of death, they will process the discharge and notify the executor or personal representative of the discharge.

It’s important to note that in some cases, the loan servicer may request additional documentation or information before processing the discharge. Additionally, the process for discharging the debt may vary depending on the type of federal student loan the borrower had. For example, if the borrower had a Parent PLUS Loan, the loan may be discharged upon the death of the borrower or the student for whom the loan was taken out.

If the borrower had a Federal Perkins Loan, the discharge process may be slightly different. In this case, the school that made the loan will be the loan servicer, and the executor or personal representative of the borrower’s estate will need to contact the school to begin the discharge process. The school may request additional documentation or information, and it’s important to communicate with them throughout the process to ensure that the discharge is processed correctly.

For federal Parent PLUS Loans that were taken out on behalf of a child, if either the parent or the borrower dies, the loan will be discharged. A surviving family member will need to forward the appropriate documentation to the loan servicer. Such documentation might include an original death certificate, a certified copy of the death certificate, or an accurate and complete photocopy of one of these documents. The loan servicer can provide specific directions on the process.

If your loved one had federal student loan debt and has passed away, communicate with the loan servicer as soon as possible to begin the discharge process. While the process may vary depending on the type of loan, providing proof of death and communicating with the loan servicer can help ensure that the discharge is processed correctly and the remaining balance is not the responsibility of the borrower’s estate or cosigner.

Private Student Loan Discharge

Private student loan discharge policies depend on the lender. Some lenders offer a death discharge, forgiving the remaining balance upon the borrower’s death. Others may require the borrower’s estate or cosigner to repay the remaining balance.

The cosigner’s responsibility also depends on the lender’s policies. Some lenders release the cosigner from their obligation upon the borrower’s death, while others may require them to continue making payments or repay the remaining balance.

To start the discharge process for private student loans, the executor or personal representative of the borrower’s estate should contact the loan servicer or lender and provide proof of the borrower’s death, such as a death certificate or other documentation. The loan servicer or lender will then guide them through the next steps for discharging the debt.

Keep in mind that the process for discharging private student loan debt may be more complicated and time-consuming than federal loans, as private lenders have different policies and requirements.

Exceptions to Discharge

While federal and private student loans may be discharged in some cases, there are certain exceptions that may prevent the debt from being discharged. These exceptions vary depending on the type of loan and the circumstances surrounding the borrower’s death.

One exception to discharge for both federal and private student loans is if the borrower had a cosigner on the loan. In this case, the cosigner may still be responsible for repaying the remaining balance, even if the borrower has passed away.

In addition, some private lenders may have other exceptions to discharge, such as if the borrower was in default on their loan or if they had a specific type of loan, such as a bar study loan. It’s important to check with the lender to understand any exceptions to discharge that may apply to your loved one’s private student loans.

While student loan discharge may be an option for some borrowers who have passed away, there may be exceptions to discharge that prevent the debt from being forgiven. Checking with the lender and understanding their policies regarding death discharge and cosigners can help you better understand the options available to you.

Tips for Dealing with Student Loan Debt After a Loved One’s Death

Dealing with student loan debt after the death of a loved one can be a challenging and emotional process. Here are some tips to help you navigate this difficult time:

  • Gather information: Gather all the information you can about the loans your loved one had, including the type of loan, the lender, and the outstanding balance. You can typically find this information on the loan statements or by contacting the lender directly.
  • Notify the lender: Once you have gathered this information, it’s important to notify the lender of your loved one’s passing. The lender will typically require a copy of the death certificate and may also ask for additional information, such as the name of the executor of the estate.
  • Understand your options: As we’ve discussed, there may be options for discharging student loan debt in some cases. Work directly with the lender to determine if any of these options apply to your situation.
  • Consider seeking professional help: Dealing with the legal and financial aspects of a loved one’s death can be overwhelming. Consider seeking the help of a financial advisor or attorney who can guide you through the process and help you make informed decisions.
  • Prioritize your finances: If you find yourself responsible for paying the student loan debt of a loved one after their passing, prioritize your finances, and make a plan for how you will handle any outstanding debt. This may involve paying off higher-interest debt first or seeking a loan modification or refinancing option.

Dealing with student loan debt after the death of a loved one can be difficult, but with the right information and resources, you can navigate the process and find a path forward. Remember to take things one step at a time and seek help when needed.

Related Questions

How is the process different if the student loan borrower passes away and had multiple student loans with different lenders? When a student loan borrower with multiple lenders dies, each lender has its process to handle the loans. The borrower’s representative must contact each lender separately for loan information, making it a time-consuming process compared to having one loan.

How can a family member or executor of the borrower’s estate obtain information about the loans, such as the outstanding balance and interest rates? To obtain information about a deceased borrower’s student loans, the family member or executor can contact the loan servicer. They’ll need to provide the necessary documentation, including the death certificate. The servicer can then provide details about the account.

About the Author

This Website Is Using Cookies. We use cookies to improve your experience. By continuing, you agree to our cookie use.

Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
  • Banks
  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
  8. Other: You have the right to be treated with respect by our staff, and we expect the same from you in return. We encourage you to always ask questions if something is not clear. We also encouraged you to express your thoughts and advocate throughout our services.

You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).