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What Happens to Student Loans if the Borrower Dies?

Benjamin Franklin once said, “In this world nothing can be said to be certain, except death and taxes.” Had he gone to school in modern-day America, he might have added student loan payments to his list.

Approximately 40 million Americans are carrying around some type of student loan debt. Nearly 70% of students graduate college with some type of debt. When considering students who attended graduate schools, that number goes even higher.

While many of these students will be carrying this debt for the majority of their lives, statistically some of these students will die before fully paying off their loans. When a student loan borrower passes away, who is responsible for paying back the debt?

The answer depends on the type of student loan. With federal student loans, the loan is canceled automatically and the debt is discharged by the federal government if the borrower dies. The family of the deceased borrower will not be hassled or harassed about the debt in the future.

In contrast, private student loans often add to the nightmare of the borrower’s death. Each individual private student loan company will have its own rules regarding how the debt is handled in the case of the borrower’s death.

Some private student loans, like those managed by Sallie Mae and Wells Fargo, offer death or disability forgiveness policies. Most private student loan borrowers, however, do not have a program for forgiving debt in the event of disability or death.

With these types of student loans, the person who is liable for the balance of the debt will depend on the terms and structure of the loan. Many student loans require a co-signer, who is often the borrower’s parent, relative, or spouse. In the event the borrower dies, the co-signer is often fully responsible for the student loan debt even though the co-signer did not receive the benefit of the loan.

In most cases, private student loan providers will first attempt to satisfy the debt out of the proceeds of the deceased’s estate. If there is not enough money in the estate to cover the loan, then the loan company will attempt to collect from the co-signer or next of kin.

Some private student loan companies are notorious for aggressively pursuing relatives and family members for the deceased’s debt. While the private loan company may claim that these relatives have an ethical or moral duty to pay the debt, they may not have a legal obligation to do so. It is important to review the terms of the loan to determine who is actually required to pay off the debt, if anyone.

If you are being pursued by student loan companies for debts that you don’t owe, contact Loan Lawyers today. Our attorneys can review your creditors’ claims and ensure that you only pay what you have an obligation to pay. Often, our attorneys can negotiate settlement agreements or payment plans on your behalf, and we can also pursue debt collectors who break the law while seeking payment.

To schedule your free consultation, contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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