Student loans are an interesting type of debt. It’s a type of loan that can come from very different sources, and where the student loan comes from determines the repayment terms – including what happens to the debt after the borrower dies.
We’ve discussed the topic of inherited debt in general and gotten specific about auto loan debt after death. Now we turn our attention to managing the student loan debt of a deceased family member.
Striking Student Loan Statistics
Given that only 37% of Americans over the age of 25 have a bachelors degree or higher, it’s surprising to find that 13% of American adults are paying off a federal student loan. But as we’ll discuss further below, that is only one type of student loan.
About 25.7 million people are currently repaying federal student loan debt and another 4.4 million are in default. Three million people have deferred their federal student loans, and 1.2 million are in forbearance. Almost three quarters of American adults with a private student loan are repaying it while 17% are currently deferred.
On average, people who earn a Bachelors degree and took out loans to get it, graduate with $29,100 in debt. Based on the Federal Reserve’s numbers, there’s around $1.74 trillion in student loan debt right now. That’s trillion with a T, and it’s more than auto loans and credit card debt combined.
And the debt doesn’t just belong to young adults fresh out of college. StudentAid.gov reported that 2.7 million people who are 62 or older have student loan debt and 6.3 million people between the ages of 50 and 61 do as well.
All this means many people in the coming years will be faced with handling a family member’s student loan debt after they die.
Steps to Take If the Deceased Had Private or Federal Student Loan Debt
Handling Federal Student Loan Debt
There are two primary types of federal student loans: unsubsidized and subsidized. But there are also various loans within those categories, such as Parent PLUS loans. No matter what type of federal student loan a family member had, it should dissolve after the borrower’s death.
You will need to get a certified copy of the death certificate to provide as proof of their death in order for the loan to be dissolved and the debt to be gone.
Handling Private Student Loan Debt
Private student loans are a bit more complicated. Unlike federal student loans, the debt doesn’t automatically dissolve upon proof of death. The loan may be discharged, but more often the estate has to repay the loan. If the deceased’s estate can’t cover the cost, family members aren’t responsible for paying off the loan.
If you are dealing with the debt of a deceased family member, Direct Cremate can handle the cremation so there’s less you have to worry about. Give us a call or text to arrange direct cremation services.
