Are Student Loans Discharged Upon Death?

Posted on July 11, 2016 at 12:00pm by

Are student loans discharged upon death?You are only half-correct if you assumed that dying can discharge student loans. Only borrowers with federal student loans and some types of private loans receive discharges. Other borrowers are not quite as lucky. The U.S. Department of Education grants death discharges to borrowers with federal loans. Parents who cosigned private or state student loans may be on the hook for the remaining payments if their children pass away.

The New York Times recently published a horrifying story discussing this scenario. A mother is making student loan payments on her murdered son’s student loan debts. While the Department of Education forgave her son’s student loan balance, a New Jersey state agency that had lent to her son was not as forgiving. New Jersey’s Higher Education Student Assistance Authority is requiring the mom to make 92 $180 monthly payments. Other parents and spouses have likely gone through similar circumstances.

State agencies stopped providing student loans in 2010. Private lenders may require the parent cosigners of deceased borrowers to make payments. Some private lenders may offer loan discharges after death, but it is not a certainty.

How Do Death Discharges for Federal Student Loans Work?

Parents or spouses of deceased loved ones with federal loans can present a certificate of death to schools or loan servicers to receive discharges. Federal direct loans, Perkins loans and Parent PLUS loans are eligible for discharge.

Forgiven Parent PLUS loans are treated as taxable income by the IRS. Parents should be aware of this possible risk while seeking discharges.

The Kansas City bankruptcy attorneys at The Sader Law Firm are happy to help struggling borrowers find ways to manage student loans debts.



Tags:

Leave a Reply

Your email address will not be published. Required fields are marked *