Do Your Student Loans Die With You?
You may feel like you’ll be paying off student loans until the day you die. But even that may not be the end of it.
“It all depends on the type of loans you have and the lender”, says Adam Minsky, a student loan attorney with offices in Boston and New York in a recent article titled Your Student Debt Doesn’t Always Die with You.
If your student debt is federal, it will be discharged if you die, which means you won’t have to make any more payments. Your loan servicer will want documentation of death from your parent, spouse, or another person you designate. An original or a certified copy of the death certificate is required.
If the loans were borrowed by a parent and the student for whom the parent obtained the loan dies, the federal parent PLUS loans will also be discharged.
“The first step is to determine if the loan is federal or not,” Minsky says. “If it’s private, then it’s more nuanced; it comes down to what the contract says and when the loan was issued.”
For the discharge to take place, one of the following is required:
- (I) An original or certified copy of the death certificate;
- (ii) An accurate and complete photocopy of the original or certified copy of the death certificate;
- (iii) An accurate and complete original or certified copy of the death certificate that is scanned and submitted electronically or sent by facsimile transmission; or
- (iv) Verification of the borrower’s death through an authoritative Federal or State electronic database approved for use by the Secretary.
If you don’t want to burden your parents with this responsibility, you can ask someone else. You could find a backup family member or friend to submit a death certificate to your servicer. Or you can appoint someone officially in your will.
Death and Taxes
There is also an IRS exclusion from income for student loan death discharges through 2025. Thismeans that you don’t have to pay taxes on the discharged debt. Which is good because you’rewell, dead.
In the event of your parents’ death, what happens to their loans?
If a parent borrower or the student for whom the PLUS loan was taken out dies, the PLUS loan will be discharged. The servicer must receive proof of death in the form of an original or a copy of the death certificate.
If you have a private parent loan, check with your lender to see what their policies are.
While you are still alive, if you have questions about death or any other type of discharge, you can always call TitanPrep Customer Service at 657-204-6797