It's a morbid question, but one worth considering if you want to make sure you have your financial ducks in a row. What happens to your student loan debt if you die?
The law treats student loan debt differently than other types of debt. Here's what you need to know about what happens if you're no longer here — but your loans still are.
What happens to federal loans if the borrower dies?
If you have federal student loans, the government discharges the debt if you die. This is good news for relatives and cosigners. They will not need to take on the burden of repaying the debt as they grieve the loss of their loved one.
Relatives who survive you or another representative of your estate will need to work with the loan servicer to process the death certificate.
Note that while your relatives won't need to repay the loan itself, they may get hit with a tax bill. If you took out a Parent PLUS loan, the IRS will send a 1099-C form that treats the canceled debt as taxable income.
What happens to private loans?
If you have private student loans, this looks a little different. Sallie Mae, Wells Fargo, Discover, and NYHELPs lend private student loans, and they offer options for loan forgiveness if the borrower passes away.
But most lenders don't provide that option when they underwrite student loans. They'll seek repayment of the loan in full from your estate. If the assets you leave behind can't cover the remaining balance, your loan cosigner is legally responsible for repaying the debt.
This likely affects you -- or more specifically, your parents. Parents or grandparents cosign with student borrowers on over 90% of private student loans. They must repay your debt if you pass away.
The same is true if you live in a community property state and get married. Your spouse will take on the debt and could be responsible for repaying it.
What to do to protect your relatives or cosigner
Reach out to your lender to ask about death or disability discharge options. These will vary from lender to lender.
You can also look into insurance options that . Make sure you work with a trusted professional to help you here. While fee-only financial advisors can't sell you insurance, they can help you create a financial plan that accounts for your student loans and protects your family in a worst-case scenario.
Struggling with payments? Get help
Student loans and the financial burden they place on borrowers can be overwhelming. But you can get help -- both for yourself and your finances. If you or someone you know needs immediate help, please call the National Suicide Prevention Lifeline at 1-800-273-TALK (8255).
Then reach out to your lender to ask for help with your student loans. They may be able to provide you with a repayment plan, offer a loan forgiveness program, or work with you to help you manage your current payments.