Student Loan Debt after Student Death?

Paying for College
1

<p>I hope this is not too morbid sounding for some people, but I was just wondering what happens to student loan debt if a graduated student dies before it is paid off? If a student has a lot of private loan debt, would it be wise to take out a life insruance policy? Does cause of death play a role (ie: accident vs suicide?)</p>

<p>I have read that federal loans just disapear, but wanted to know about private loans. I feel like with this economy it would be good to know, as I dont think anyone wants their debt passed on to others. Thanks!</p>

2

<p>Debt at death is paid by the estate, and when those funds are exhausted, the debt is discharged.</p>

3

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<p>Not is there is a co-signer. If you don’t get insurance to pay off the debt, the co-signer becomes responsible for the balance. Although some private lenders are now offering debt cancellation as a provision of their loans (similar to the Federal loans), which in effect just means they are transparently bundling life insurance into the cost of the loan.</p>

<p>If you will be taking on a lot of private loans, getting life insurance to cover them is a wise move, it is usually very cheap for student-age people.</p>

<p>Most life insurance policies will not pay a claim for a certain amount of time from the start of the policy if the death is from suicide, typically two years.</p>

4

<p>My dad is really worried about this because I am graduating with about $40,000 in private student loan debt and he has cosigned. He has been looking at life insurance policies, etc to figure out how to handle that. Federal student loans are forgiven in the event the student dies.</p>

5

<p>A $50K term life policy with a 10 year level term premium (which means the cost won’t go up for 10 years) should cost less than $100/year for someone your age, unless you have serious health issues. Even if you smoke it should be less than $150/year.</p>

<p>It’s pretty much a no-brainer, I think.</p>

6

<p>Hmm…I thought the Stafford loans were forgiven in the event of the death of the graduate.</p>

7

<p>Stafford loans are. I think they are talking about private loans.</p>

8

<p>Thanks Swimcats…when I hear STUDENT loan, I think about loans in the student’s name only. Usually that means only the Stafford or Perkins loans which I believe are both forgiven in the event of the death of the student. </p>

<p>For any other kind of loan, you would have to look at the provisions of the LOAN. You should discuss this with the lending folks to see what their policies are.</p>

9

<p>Since I’m graduating with over 100k in debt… I should look into getting life insurance…</p>

10

<p>^^^^^
Only if someone co-signed for that 100K. Otherwise the lenders eat it and you may not want to insure the lenders by paying a life insurance premium.</p>