What happens to your student loans if you go away?
The short answer: It depends on the type of loan you have.
- Federal Loans: Loans given directly to a person through U.S. Department of Education are printed ("forgiven") upon that person's death, once the necessary documentation has been submitted. Read more information about federal student loans at StudentAid.gov.
- Parent PLUS loans: As a type of federal student loan, these are also taken out at the time of death. This includes the death of the student or the death of a single parent to whom the loan is granted. (If the loan is issued to two parents and one dies, the surviving parent is still responsible for repaying the loan.)
- Private loans: Here it becomes difficult. Loans issued by private organizations such as banks, credit unions or government-affiliated organizations each have their own conditions for how debts are handled after death. In general, however: Many private student loan debts become the responsibility of the estate. If you have private student loans, contact your individual lender to understand your personal obligation.
What about Cosigners and spouses?
Can your parents or spouse get stuck paying off your student loans after your death? Here's what you need to know:
Cosigners and student loans
A cosigner is someone who is equally responsible and legally obliged to repay a loan if the student borrower does not pay the loan on time. Having a cosigner with a good credit record – as a parent – often allows a student to borrow at a lower interest rate.
If the student borrower who took the loan dies before it is paid off – the cosigner is responsible for the outstanding debt. This is especially true for private loans: While federal student loans can allow a borrower's employees to complete paperwork that frees them and the estate from debt, many private student loans do not.
Spouses and student loans
What happens if you are married? Will your student loan debt be responsible for your surviving spouse?
It depends on your state and your unique situation. Here are some things to keep in mind:
- Is it a federal or private loan? According to the examples above, federal student loans are paid out after the borrower's death. Private loans can be the estate's responsibility.
- Do you live in a state-owned real estate state? Nine US states are considered "community real estate states": Arizona, California, Idaho, Nevada, New Mexico, Texas, Louisiana, Wisconsin and Washington. In these states, the spouses jointly own everything they earned or acquired during their marriage – even if one person earns (or spends) more than the other. This also applies to debts that arose during the marriage, such as private student loans.
- Did you take out your spouse's loan? You have an obligation to borrow in all states if you show up.
- When did you take out a loan? In a Real Estate State: If your spouse took out a student loan before you got married, you are not usually responsible for paying them if your spouse dies.
- Still not sure if you or your spouse can be responsible for a loan? Check out the student loan planner's article on the subject for more detailed information.
This is not legal or financial advice. For questions about your unique situation, consult an attorney or financial planner.
Think of Life Insurance for Student Loans
A financial difficulty will only make the devastation of losing a loved one so much more stressful and difficult. This is why life insurance for student loans is something cosigners should consider.
To get an idea of how this works in reality, you can read stories about families dealing with this unfortunate and costly situation in this article from CNN Money.  A life insurance policy can provide the means needed to eliminate or reduce student loan debt if the student or degree passes away before the debt is met.
Also: Remember that life insurance is cheapest when you are young and healthy. If you get coverage now (with student loan debt in mind), you may have a policy to cover other financial obligations (such as a mortgage or raising a family) that develop as you age.
Here are three options to consider from Erie Family Life:
- Term Life: A term life policy is a good protection to buy at a young age – and it is usually the most affordable life insurance option. You also have the option of converting a term policy into a permanent insurance policy later in life – even if a health condition that normally excludes coverage develops later. * Read more about Erie Family Life.
- Whole life: A whole life policy, sometimes called a permanent life policy, allows the young adult to accumulate cash savings throughout his life. In addition, the new premium can be guaranteed for life. Learn more about full life insurance from Erie Family Life.
- Guaranteed insurance alternative (GIO) rider : Not all insurance companies offer a GIO rider for life. If you get a life policy with the rider Guaranteed insurance option when you are young, you already have the opportunity to buy additional life insurance if you develop a medical condition later in life (which may otherwise affect your ability to get covered) **. Learn more about the GIO rider and how it works.
To learn more about protection and peace of mind, student loan life insurance can offer you, talk to your local ERIE agent.
Amanda Austin, Marie Turko and Abby Badach Doyle contributed to this story.
* The term policy and conversion privileges must apply at the time of conversion. Subject to age and plan restrictions.
** Guaranteed insurance alternative riders are subject to signature approval. Not available on all levels. Edition ages 0-40. The option to add coverage is available when certain qualifying life events occur. Talk to your local agent for specific drivers, alternate dates, availability, conditions. Additional cost will be added. The original purchase of GIO riders is subject to subscription.
A university degree is a necessary ticket to many careers – but it often comes with a steep price tag.
The average class of 2019 college graduates borrowed $ 30,062 in loans, according to data reported to US News. At the same time, the collective student loan debt in the United States is about $ 1.7 trillion.
These figures apply to students, academics and their families — especially parents who may have signed private student loans.
Managing debt is one of the last things anyone wants to think about while grieving. This is why it helps to understand the financial consequences of your student loans in advance – including how they can affect your family's finances and credit if you are away.
It's an awkward question, but a common question: If I go away unexpectedly, what happens to my student loan debt?
For personal advice for your unique situation, contact a financial advisor or a lawyer. In general, this is how it works.