What Happens To Your Student Debt After You Die

What Happens To Your Student Debt After You Die

Written by Veronica Ott
Fact-checked by Caitlin Wood
Last Updated November 3, 2021

Student debt can feel larger than life, maybe even to the point that it spills over into death. Many individuals with looming student debt may wonder what happens to their debt once they pass away. Debt after death is a morbid topic, however, it is important to understand to protect yourself and loved ones. In this article, we will explore what happens to your student debt if you die. 


What Happens To Federal Student Loans After You Die? 

All federal student debts are dischargeable when the borrower dies. Federal student loans are not passed on to any of your family members or your estate. Instead, your student debt will be completely forgiven by the government and no one will be responsible for paying it. This is one of the several benefits of federal student debt. 

In order to complete the debt forgiveness process, someone will need to provide proof of death to the student loan service manager overseeing the deceased individual’s debt. Once this is done, the debt will be fully forgiven. 

What Happens To Your Private Student Loans After You Die?

There is much less protection with private student loans when compared to federal student loans. Private lenders have no legal obligation to discharge or cancel student loans in the event that the borrower dies. 

However, that doesn’t mean that private lenders won’t discharge or cancel the debt if the borrower dies, some may do so anyway. If you want to get more clarity, review your student loan agreement to identify details about how the student loans are handled in the event of the borrower’s death. 

If the private lender does not discharge or cancel the debt, it won’t disappear. Rather, outstanding debt is passed on to the estate of the deceased borrower. An estate is settled through a probate process which includes paying off and settling outstanding debts. If there isn’t enough money in the estate to settle all debts, including student debts, the debt often remains unpaid. Although one thing is certain, unpaid student debt will not be passed on to someone who is not legally responsible for the debt, such as a family member or friend of the deceased individual. 

What If The Co-Signer Dies?

In the eyes of a lender, the primary borrower and co-signer on an agreement both have equal responsibility to repay debt. If a co-signer on an agreement dies, it can cause problems. Some agreements state that if the co-signer passes away, the student loan is automatically put into default, regardless of whether the primary borrower has continued to make payments. At this point, the lender can demand the full payment of the loan which would cause financial hardship for the primary borrower. 

These clauses have become less common, but it is definitely something to watch out for. If you’re concerned about this, take a minute to review your agreement to identify if this condition is applicable to your co-signed student debt. 

Related: What Happens if your Co-signer Declares Bankruptcy?

What Happens If You Have A Spouse?

Generally speaking, the surviving spouse will not be held legally responsible for student debt repayment of their deceased spouse. There can be exceptions, for example, if the deceased spouse was a co-signer on a loan. 

How To Protect Your Family From Your Student Loan Debt

As we saw above, your family and loved ones will not become legally responsible for your debt if you die, unless they have co-signed a loan with you. One thing you can do to protect your family and loved ones in this unlikely scenario is to purchase a life insurance policy. The proceeds from life insurance will cover your outstanding student debts if the lender demands payment in full from your family or loved ones.

Keep in mind that your life insurance policy doesn’t need to be the most expensive on the market. So long as the proceeds are enough to cover your student debt, you will be protecting your family and loved ones. 

Depending on the type of student loan debt you have, how it will be handled in the event of your death varieties. This is why it is so important that you fully understand all your options and to read your loan contract before you make any final decisions.

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Veronica is a writer who specializes in creating unique and educational personal finance content. She has extensive experience writing blog posts for companies in the financial sector. Veronica's background is in accounting as she graduated from Western University in 2017 with a degree in accounting. She is passionate about using her accounting expertise to help others with their personal finance questions and issues and enjoys using her writing to educate Canadian readers. When Veronica is not writing, she enjoys film, reading, travelling, going to the gym, and listening to music.

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