It’s not so unusual these days for families to learn after a loved one dies – even if they were in their senior years – that they were still paying off student loan debt. This debt (which after a while consists mostly of interest owed on the original loan) has been following people later and later into their lives.
So does the remaining student loan debt have to be paid from the deceased person’s estate? Worse, do family members have to pay it off?
Different kinds of debt are handled differently after the borrower dies. Not even all student loan debt is handled the same way.
Federal student loans and PLUS loans
The good news is that if the deceased had a federal student loan, that debt will typically be discharged. This is the most common type of student loan, so it’s likely that’s what your loved one had.
If the deceased had a PLUS loan, which is a federal loan that parents can get in their name to pay for a child’s undergraduate or graduate educational expenses, that debt will also generally be discharged. It’s crucial to find out just what kind of loan it was.
Private student loans
Some people take out private student loans. These are sometimes dischargeable if the borrower dies. However, it depends on the lender and the terms of the loan. That’s why it’s important to get a copy of the loan documents.
It’s also possible that a loved one was a co-signer on a child’s, spouse’s or someone else’s private student loan. Again, it’s important to look at the loan documents.
Don’t delay in dealing with a loved one’s student loan
If your loved one was responsible for making payments on a student loan – for themselves or someone else – the executor of the estate should contact the loan servicer to notify them of the death and find out what to do next.
It’s crucial to identify and address all of a loved one’s debts to determine which will be discharged and which must be paid as soon as possible. Inheritances can’t be distributed until any debts that have to come out of the estate are paid. It’s smart to have experienced legal guidance as you deal with these and other matters involving a loved one’s estate.