With the soaring cost of higher education, and the increased amount of people requiring loans to meet high tuition costs, it is very important to be informed and aware of the stipulations regarding loan repayment. While not many want to think of their mortality, awareness surrounding their student loan debt, and the implications it may have on their loved ones, is imperative.

Federal Loans

First, let’s start with the good news! Federal loans are generally discharged upon the death of the student. In addition, Parent PLUS Loans, which are federal loans, may also be discharged upon death of the student or the parent borrower. The procedure for getting federal student debt waived involves mailing in a certified death certificate, at which point it is reviewed to make sure there is no co-signer on the loan. From there, it will be processed before it is officially deemed a ‘verified death’, and the remaining debt will be removed.

Private Loans

With private lenders the process is not as cut and dry.  As with other debts, private lenders may bring a claim against your estate to collect the remainder owed after your death. Some private lenders are willing to discharge debt following death, but this is ultimately up to their discretion. It is always best to communicate with your private lender, and understand the details and requirements of your student loans.

Loans with a Co-Signer

Loans that have a co-signer make the process more difficult. Co-signers are liable for the debts accrued, and can be placed in a severe financial situation if the primary borrower dies. In some cases, the death of the borrower could send the loan into default, requiring immediate payment in full from the co-signer. Some private lenders are willing to work with co-signers and re-establish a payment schedule, however the cosigner may still be required to pay off the debt, and with potentially large amounts of money hanging in the balance, it is best to be prepared for the worst-case scenario.

Losing a loved one is an emotional, and sometimes overwhelming, process. When this is coupled with thousands of dollars in student loans being placed in the grieving individual’s lap, the situation can quickly become unbearable. The good news is that with proactive planning, this situation could be avoided, and a number of potential solutions exist. While premature death is the last thing on many recent graduates’ minds, planning for worse case scenarios could save them and their loved ones greatly in the long run. An estate planning attorney can be an immeasurable asset in this planning.  Contact Schromen Law, LLC today to discuss your estate planning options surrounding student loans.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Schromen Law, LLC and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.

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