Millions of Americans struggle to pay student loan debt each year, making it challenging to truly reap the benefits of their hard-earned education. You might think there’s no way you’ll pay your loans off in your lifetime, especially if your life is unfortunately cut short. You’re not alone in wondering what happens to your unpaid debt after death.

In fact, 73% of borrowers have no clue what happens to unpaid student loan debt after they die. Student debt has become somewhat of a crisis in the United States, increasing by 267.1% since 2006 and totaling $1.766 trillion.

You should have a plan for paying this debt to ensure a relative isn’t surprised by it after your death. You may be able to discharge your debt after death or file for bankruptcy.

Here’s what happens to your educational loans when you die and how to pay them off in your lifetime.

Are Student Loans Erased Automatically After Death?

This question depends mainly on the type of loan you acquired. The majority of student debt is from federal student loans. Recent data reveals that 43.6 million borrowers have federal student debt totaling $1.645 trillion, accounting for 93% of all student debt.

What Happens to Federal Student Debt?

If you die before you pay off your federal debt, the government will erase your unpaid educational loans through a discharge. To qualify for a discharge, the representative of your estate must contact the lender and notify them of your death. Further, they must furnish your original death certificate and a copy to prove your untimely death.

Your parents might have obtained a parent PLUS loan on your behalf that helps you pay for educational expenses federal loans don’t cover. You’ll be glad to hear that the federal government discharges these loans, too, in the event of an unfortunate passing.

What Happens to Private Student Debt?

Private student loans account for a small percentage of total student debt (6.9%); however, it’s essential to know that the process for discharging this type of debt is much different than federal loans. Private lenders are not required to automatically discharge debt once a borrower dies.

However, some private lenders may grant your request to discharge a deceased borrower’s unpaid educational expenses. It all depends on their policies, and these situations are often handled on a case-by-case basis.

Is the Cosigner Responsible for Paying Student Loans?

Private lenders may hold your cosigner accountable for your unpaid debt. Consider removing any cosigners from your loan if you are making on-time payments on your own.

Additionally, federal law states that private lenders must relieve cosigners of their obligation to repay student debt if the loan was obtained after November 20th, 2018. Any loans acquired prior to this date still hold the cosigner accountable for any outstanding balances.

Can Bankruptcy Erase Student Debt?

Although bankruptcy cannot discharge most forms of student debt, there is one exception. The Bankruptcy Code states that you can discharge student debt if you file an adversary proceeding and prove that payments may cause “undue hardship.” According to the Federal Student Aid website, the court might approve your request if the following are true:

  • Repaying the loan would make you unable to maintain a minimal standard of living
  • The hardship would continue for almost the entire repayment period
  • You made good-faith efforts to repay the loan

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