It is important that you know the type of student loan (federal or private), the guarantors of the student loan (parents, etc), and the law of the state where you live. This article cannot walk you through each variation of different student loans, but the goal is to provide you with an outline and some ideas to consider in planning your estate (what you leave when you pass away).
Parent PLUS borrowers are also eligible for a death discharge since PLUS loans are federal loans. According to Jay Fleischman, a student loan lawyer, “These loans can be discharged when either the parent or the student dies,” he explained. “Discharged federal student loan obligations won’t pass to your estate, and your heirs won’t have to pay them off.” But, the remaining debt canceled is treated as taxable income “forgiveness of debt”.
Private student loans:
Private student loans, including refinanced loans, are more like traditional personal loans, where the lenders might come for your estate when you die. That means your creditors can file a claim against assets you owe upon your death.
Cosigning a student loan:
A co-signer is legally responsible for your debt after you pass away, regardless of the type of loan in question. Consider looking into a cosigner release.
Marriage and student loans:
If you acquired student loan debt during marriage and live in one of the nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin — your spouse could be liable for your student loans after you die.
If you do not live in a community property state your spouse probably not liable unless they cosigned the loans.
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