When College Students Die Leaving Behind Debts

When it comes to college students, estate planning issues are not usually high on their list of priorities. Graduating, finding a job, and trying to pay back crushing student loan debts are often far more important issues than the possibility of one day becoming incapacitated or passing away.

Yet the student loans that many college students have can pose a significant estate planning issue, even if the college students themselves don’t realize it. When it comes to worrying about repaying student loans in the future, there are several issues you should consider.

College Student Loan Debt

If you are like a large number of college students in the United States, you probably have some student loans. The average student graduating college today has about $30,000 in debt. However, depending on your circumstances, you could have a lot more.

But regardless of the amount of student loan debt you have, the general rule is that you are solely responsible for paying those obligations back. Whether you agree to a payment plan, consolidate your loans, or do anything else, you, as the debtor, have the legal obligation to pay that money back.

Death and Student Loans

While you probably don’t want to think about it, have you ever wondered what would happen to your loans if you die? Who will have to pay those loans back? Would, for example, your parents have to pay any loans that you never paid back yourself?

When it comes to student loan debt and the death of the borrower, there is a general rule that applies. Namely, no one else will have to pay back your unpaid student loans should you die. If, for example, you have $50,000 in student debt and die without paying them back, it won’t fall to your parents, relatives, or others to pay back the remaining obligations.

Private Versus Government Loans

There is one significant exception to the general rule that only you are responsible for paying back your loans. Most students acquire government loans, which do not require cosigners or co-borrowers. Private student loans, on the other hand, can be very different.

Many financial institutions that provide private student loans require students to have a cosigner agree to the loan terms. If you have a loan with a cosigner, this is very different than one that you agree to pay back on your own. If you fail to pay back the loan, it becomes the cosigner’s responsibility to pay back the outstanding debt amount.

In other words, if you should die leaving behind private student loan debt, your cosigners will be responsible for paying the unpaid amount.

Student Loan Protections

If you are worried about leaving behind unpaid student loans, one possible protection you might look into is acquiring life insurance. With a life insurance policy you can ensure that the cosigners will not be made to pay for your obligations because you can use the insurance benefit to pay back the loans.

Financial Education Workshop

Good financial planning can also help pay back loans after an unexpected death.  On July 17th, Catherine will be presenting a wonderful workshop on financial planning. Click here to register for that workshop today!

Author Bio

Catherine Hammond is the CEO and founder of Hammond Law Group, a Colorado-based estate planning law firm she founded in 2005. With a strong focus on protecting families from the legal consequences of disability and death, she creates comprehensive estate plans that minimize taxes, costs, and government interference.

A native of Denver, Catherine completed her undergraduate studies at Coe College in Iowa, and her Juris Doctorate from the University of Denver College of Law in 1993, concentrating on estate planning, tax, and mediation. Catherine is a member of various professional organizations, including WealthCounsel, ElderCounsel, the National Academy of Elder Law Attorneys, the Colorado Springs Estate Planning Council, and the Purposeful Planning Institute. Beyond her legal expertise, Catherine provides transformational coaching to support clients and their families through life transitions.

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