What Happens To Your Student Loans When You Die?

May 05, 2011 | Filed Under Debt, Estate Planning, Life Insurance, Student Loans | 1 Comment 

Imagine that you have borrowed money to go to college. You applied and were approved for Federal loans and Private loans. The Federal loans offered were not nearly enough to cover tuition, so you took out Private loans in addition to Federal loans. You attended college, graduated and at some point in time began working somewhere and began paying down your student loan debt. Let’s also assume that you got married and had children.

For the sake of this post, assume you die with $100,000 of student loan debt. Your Federal loans total $30,000 and your Private loans total $70,000. What happens?

In short, your Federal student loans will be discharged and your estate will be liable for the Private loans. As with most other debts, Private student loans must be repaid no matter what happens to you. Executors and Administrators of estates with Private student loan claims against them should ask the lender if they will grant a discharge due to death. The living should consider a life insurance policy that will cover all debts (and then some).

As always, consult your estate planning attorney to discuss your specific situation.