Who Pays for Student Loans After Death?

Who Pays for Student Loans After Death?
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Many of us are keenly aware of the fact that student loans are stubborn things that cannot be eliminated even through bankruptcy. Instead, the government will wait for any other benefit to come along like a tax refund, and they will collect the outstanding payment from those funds instead plus interest. Sad, but true, one of the only ways to have a student debt forgiven is through the death of the borrower.

Federal Loans

The death of a borrower for a federal student loan borrower generally triggers the discharge or waiver of amounts still owed. Further, some student loans taken out by parents can also be discharged when a parent borrower or the benefitting student dies. This is specified under the federal laws and regulations controlling federal student loans. That being said, notification needs to be confirmed by providing a copy of the relevant death certificate to the school or federal loan office for confirmation. This means that there will be no collection efforts going after parents or spouses.

Private Loans

Where a spouse has co-signed for a private student loan, things tend to get a bit murkier. Where a spouse is not named at all on the loan, even if the borrower is married, the spouse will usually not be held responsible for the debt in a state that doesn’t follow community property law. However, community property law states could make the spouse responsible by the simple fact that the loan occurred during the marriage. These states include California, Idaho, Arizona, Louisiana, New Mexico, Texas, Nevada, Wisconsin, and Washington. Alaska will apply community property treatment if the spouses agreed to the condition with an agreement.

However, regardless of state laws on property, much will depend on the actual terms of the private loan contract. Some contracts include discharge for a borrower’s death and others don’t. So it’s critical for a borrower to read the agreement ahead of time before committing to the student loan in question.


Private loans, as noted above will often include clauses in the given agreement to continue collections long after an initial borrower has passed. This can be through a co-signer involvement or an estate clause. Such agreements and related collections can often be enforced in court under state law if a judge agrees versus being nullified by existing federal law. During the collection period, such loans can still be charged interest, which tends to be higher than federal loans as well. However, private loans don’t enjoy the protection from bankruptcy that federal loans do, so in a worse case scenario, a Chapter 7 bankruptcy filing is the ultimate defense.

Collection Efforts

Where collections are allowed after death, collectors will often go after the dead borrower’s estate. This includes any bank accounts or property declared in the probate documents as associated with the estate. Then the collector will move to the co-signer next when all estate options have been exhausted. Again, this effort is limited to whether the spouse co-signed the loan agreement or not.

Tax Liabilities

Even if the loan is forgiven, you still have to watch out for taxes. Forgin federal or private loans are considered new taxable income by the IRS and tax agencies. Student loans are not exempted from this treatment, so a borrower could still see a tax hit, depending on how much the forgiven loan balance affects a borrower’s income tax return.