With student loan debt following Americans increasingly later into their lives, more families are finding that their loved ones still had student loan debt when they passed away. Different types of debt are handled in different ways after a person dies. Some must be paid by the estate or possibly even relatives, while others go away.
Even with student loan debt, what type of loan the borrower had determines whether the debt lives on. Let’s take a brief look at what loved ones need to know.
Federal student loans vs. private student loans
Most Americans take out federal student loans. This type of loan debt is discharged if the borrower dies still owing money, as long as the loan was solely in their name.
This is also the case if the deceased took out a PLUS loan. These are federal loans that parents can get to pay for their child’s college or graduate school education. These loans are also discharged in death.
If the loan was through a private lending company, it’s still likely to be discharged. However, it’s up to the lender. Whether or not it’s dischargeable in death should be detailed in the loan documents.
Contact the loan servicer as soon as possible
Regardless of what kind of student loan the deceased had, it’s important for the executor to contact the loan servicer as soon as possible to notify them of the death and determine the next steps. You’ll likely need to start with providing a copy of the death certificate.
Dealing with a deceased person’s debt after they’re gone is an important part of an executor’s responsibility. The estate assets can’t be distributed until you know what debts, if any, need to be paid. Having experienced guidance can help you handle this and other responsibilities as efficiently as possible and avoid unnecessary and costly legal issues.