What Happens to Student Loans After Death? Rules for Federal and Private Loans

Student Loans After Death: Many people still carry student loan debt well into their older years, and now more than ever. With interest rates going up and the cost of education still rising, even older Americans are struggling with debt.

According to recent numbers from the U.S. Department of Education, about 2.8 million people aged 62 or older had student loan balances by mid-2024. Back in 2017, that number was only 1.7 million. Because of this, it’s become more important to understand how student loans are handled after someone dies.

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Federal Loans are Discharged after Death

For federal student loans, the process is simple and clear. If the borrower dies, the loan is completely forgiven. It doesn’t matter if it’s a regular federal student loan or a Parent PLUS loan. These loans get wiped out after the person who borrowed the money passes away. Even if someone had “endorsed” the loan, which is similar to co-signing, they won’t be held responsible after the borrower or student’s death.

Families just need to contact the loan servicer and provide proof of death. Usually, the loan servicer will ask for an original or certified copy of the death certificate. Once that’s received, the loan account will go into administrative forbearance for around 60 days while they process the discharge. If families aren’t sure which servicer handles the loan, they can check the details on the official Studentaid.gov website.

Private Loans are Different

Things work differently with private student loans. Unlike federal loans, private lenders don’t have one fixed rule. Some of them do cancel the loan when the borrower dies, but many do not. According to experts, only about half of private student loans offer discharge after death. If there’s no such clause in the loan terms, then the co-signer usually a parent or spouse may be held responsible for paying off the rest. In some cases, the loan may also be collected from the deceased person’s estate, which could affect whatever money or property they were planning to leave for their loved ones.

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There have already been heartbreaking situations because of this. One story from Maine showed how a young woman passed away, and her parents who had co-signed her private student loans were still getting collection calls from the loan servicer.

“They had a horrific story to tell,” said State Senate Majority Leader Eloise Vitelli. “About having co-signed their daughter’s student loans, not really knowing what they were getting into.

“And then she died, and they were still being hounded by the loan servicer” Marca repored.