What Happens to Student Loans After Death?

Most people don’t like to think about death, especially when planning for college or helping a child through school. But what happens to student loans or prepaid tuition plans if the borrower, student, or account holder passes away? Does the debt go away, or could it fall on someone else? And what about the funds saved in a 529 plan — can they be transferred or refunded? Here's what you should know to prepare and protect your loved ones.

Are Student Loans Canceled After Death?

There are two primary types of student loans: federal and private. The government issues federal student loans. Banks, credit unions, online lenders, and other financial institutions offer private loans. 

Federal and private loans function differently but have one thing in common when the owner or beneficiary dies. Both require proof of death (usually either an original death certificate or an acceptable copy of it) before you can submit a post-mortem change of status for a student loan.

Federal Loans Dissolve

Federal student loans are discharged once proof of death is submitted. This means your spouse, children, or parents won’t be responsible for the remaining balance. The same applies to Parent PLUS loans: if either the parent or the student dies, the debt is canceled.

Private Loans Might or Might Not Dissolve 

Some private lenders offer death discharges, but others do not. If there’s no discharge policy, the remaining balance may be collected from the estate.

Depending on local laws, some states may hold a surviving spouse or other next of kin liable. Cosigners are almost always responsible. Some lenders demand full repayment immediately after death, which can significantly strain the cosigner or estate.

Since policies vary, it’s important to review your loan’s terms and speak with your lender to understand what would happen in case of death. You should also consider student loans for estate planning purposes, along with other end-of-life decisions.

Releasing Cosigners from Potential Debt

Knowing someone else is responsible for your student loan debt after passing can be disconcerting. Luckily, there are a few ways you can remove that burden from your cosigner in advance, including cosigner release and refinancing options. 

Some lenders offer cosigner releases after you’ve proven capable of handling your loan payments responsibly. After several on-time payments, you can apply for the institution to remove your cosigner from your loan altogether. The terms of cosigner release vary by institution, so you’ll want to consult your specific company’s policies to learn more.

If you can’t get a cosigner release from your current lender, you can also look into refinancing your loan with a new institution. Some lenders don’t require cosigners at all, while others require them at the loan’s inception but will let you release them after a set amount of time or payments. Don’t be afraid to ask questions and dig into the details of what is available.

What Happens to Prepaid (529) Plans?

A 529 plan is an account where an owner can deposit funds to withdraw later. The funds then pay for the educational expenses of a beneficiary. Each plan can only have one owner and beneficiary, so there should be a plan for a successor in case either the owner or beneficiary (or both) passes away before using the funds.

If the Beneficiary Passes

If the beneficiary of the 529 plan dies, the account owner still maintains control of the fund. Different plans include their own regulations, but typically the owner can choose a new beneficiary or withdraw the funds from the account. Withdrawing the funds usually comes with fees if the owner uses the money for non-educational purposes. The account owner should consult a financial adviser to determine the best approach.

If the Account Owner Passes

The situation is trickier if the owner of a 529 account passes. Many 529 accounts allow the owner to choose someone else to control the account in an emergency. If the account owner has already selected someone, the account simply passes to them. 

If the account owner didn’t choose someone, a judge might have to step in and take care of it. Sometimes the executor of your estate can also take control of the fund or choose someone else.

Another option is for the fund to go directly to the beneficiary if they are eighteen years old or older. Each state has its own guidelines, so consider checking with a finance professional or your state’s education department for clarification. 

Protect Yourself from Unexpected Debt

Whether you’re repaying student loans or saving for your child’s education, it’s smart to prepare for the unexpected.

End-of-life planning doesn’t just mean writing a will. It also includes making informed choices about your finances, designating account successors, and protecting loved ones from hidden debts or legal confusion.

If you’re not sure where to begin, we offer resources to help with:

• Prepaid cremation plans to ease future costs
• Direct cremation options that keep things simple
• Funeral or memorial plans 

Explore our planning guides to get started with compassionate, clear, and free resources that help you prepare for whatever life and death may bring