Many Americans feel like their student loan debt is going to follow them to their grave. That’s not an unrealistic fear. In 2018, people over 50 owed a cumulative $260 billon-plus in student loan debt. Just 14 years earlier, that figure had been $36 billion.
So what happens to your student loan debt when you’re gone? Will your loved ones be saddled with it? Probably not, but it’s wise to look at your student loan debt when you’re doing your estate planning.
The good news is that federal student loans — which is what most people have — can be discharged upon the death of the borrower. Your estate executor or a family member will just need to provide the loan servicer with a certified death certificate. That means the debt won’t become part of your estate, and your heirs won’t be responsible for it.
If you have private student loans, it’s likely that your lender offers death discharges if the loan is only in one name. However, they don’t have to do so. It’s wise to check with your lender and see what their policy is.
If you have a co-signer on your private student loan, the lender can hold them responsible for the balance. Moreover, as one student loan expert notes, “The death of the borrower or the cosigner can trigger default. That means the entire balance becomes due immediately, even if the surviving signer has always made payments on time.”
It’s a good idea to look at the terms of your student loans as you work on your estate plan — particularly at their death discharge policy. Your estate planning attorney can also help you if you have any questions and can help you take steps to minimize any impact that your loans may have on your heirs.