CONTRIBUTED CONTENT: What happens to student loan debt when you die?

Student loans follow many Idahoans well into middle age and beyond. Americans now owe more than $1.6 trillion in student debt, and borrowers aren't just recent graduates. Parents who borrowed for their children's education, and retirees still paying off their own degrees, carry significant balances too. That raises a question we hear in my office: if I die still owing on my student loans, will my family have to pay?

The answer depends almost entirely on one thing: whether your loans are federal or private.

Federal Student Loans: Generally Discharged at Death

Federal student loans are the more forgiving of the two. Direct Loans, older FFEL Program loans, and Perkins Loans are discharged when the borrower dies. Your family, or the personal representative of your estate, simply submits a death certificate to the loan servicer, and the remaining balance is wiped out. Your estate does not owe it, and your heirs do not inherit it.

Parent PLUS loans get special treatment. They are discharged if the parent borrower dies, and also if the student on whose behalf the parent borrowed dies. A parent who loses a child will not be left paying for that child's education.

Taxes used to be a concern. In the past, a discharged loan could be treated as taxable income, which sometimes left an estate with an unexpected tax bill. The Tax Cuts and Jobs Act temporarily excluded death discharges from federal income tax, and 2025 federal legislation made that exclusion permanent. Tax rules can change, so your personal representative should still confirm the treatment with a tax professional.

Private Student Loans: It Depends on the Contract

Private student loans come from banks, credit unions, and other lenders, and they are governed mainly by the loan agreement you signed. Many major private lenders now voluntarily discharge loans when the borrower dies, but not all do, and older loans are less likely to include that protection.

If a private loan is not discharged, the debt does not simply disappear. It becomes a claim against your estate. In Idaho, the lender can file a claim during probate, and it will be paid from estate assets before your heirs receive their inheritance. When the personal representative publishes notice to creditors, most creditors have four months to present their claims. If the estate lacks enough assets to pay, the unpaid balance generally goes

uncollected. Your children do not become personally responsible for your debts just because they are your heirs, but they also may not inherit anything if all your assets must be used first to satisfy those debts.

There are important exceptions:

• Cosigners. If someone cosigned your private loan, that person may still be on the hook. Federal law requires lenders to release cosigners when the student borrower dies, but only for private loans made after November 20, 2018. Older loans may leave a cosigner owing the full balance.

• Surviving spouses. Idaho is a community property state. If a private loan was taken out during the marriage, community property may be reachable to satisfy it. A surviving spouse should talk to an attorney before paying anything.

• Non-probate assets. Life insurance proceeds and retirement accounts paid directly to a named beneficiary generally pass outside probate. They are usually not available to estate creditors, which makes them valuable strategic planning tools.

How to Protect Your Family

Student loan debt should be part of your estate planning conversation. A few practical steps:

1. Inventory your loans. Log into StudentAid.gov to see your federal loans, and gather the agreements for any private loans.

2. Read your private loan contracts. Look for death and disability discharge provisions. If none exist, ask your lender whether a cosigner release is available.

3. Consider life insurance. A modest term policy can cover a private loan balance so a cosigner or spouse isn't left paying it.

4. Use beneficiary designations wisely. Assets that pass outside probate can reach your loved ones without first going to creditors.

5. Tell your personal representative or trustee. Make sure the person handling your estate knows what loans exist and where to find the paperwork.

Families should also be cautious after a death. Lenders and collectors sometimes contact grieving relatives in ways that suggest they must pay. Unless you cosigned the loan or are otherwise legally responsible, you generally do not have to pay a deceased family member's debts from your own pocket.

Plan Ahead

Student debt doesn't have to become your family's burden. An experienced Idaho estate planning attorney can review your debts, your assets, and your family situation, and build a plan that protects the people you care about most.

My law firm is currently offering free telephonic, electronic, or in-person consultations concerning probating estates or creating estate planning documents.

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Robert J. Green is an Elder Law, Trust, and Estate Planning Attorney and the owner of Kootenai Law Group, PLLC in Coeur d’Alene. If you have questions about estate planning, probates, wills, trusts, or powers of attorney, contact Kootenai Law at 208-765-6555, [email protected], or visit www.KootenaiLaw.com.

This has been presented as general information and not as legal advice. Do not engage in legal decision-making without the advice of a competent attorney after discussion of your specific circumstances.