Can student loan debt pass to children?
You can't inherit student loan debt
If you die and have a federal student loan, no one will be responsible for your debt —not your parents, your spouse or anyone else. The servicer will discharge your loan, or a Parent PLUS loan taken in your name, once they are provided with documentation of the death.
Whatever the reason, you might be wondering, “Can I transfer student loans to another person?” Yes, you can — just not via the U.S. Department of Education. To transfer student loans, you'll need to find someone willing to refinance with a private lender under their own name.
The same principle applies to student loans. In the case of student loans, the student is responsible for repaying the debt — whether they graduated or not. The only exception to this rule are parent PLUS loans, in which the parent — not the student — is responsible for that debt.
Answer: If a friend or family member pays your student loans off, it is probably a non-taxable gift to you. However, your friend or family member may be responsible for filing gift tax returns and for paying any applicable gift tax on the payment.
If you don't make your student loan payment or you make your payment late, your loan may eventually go into default. If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability.
25 years if any loans you're repaying under the plan were received for graduate or professional study. The remaining balance will be forgiven after 25 years.
If a parent took out a loan for your education — or helped you get a loan by co-signing — there's a way let them off the hook for it. You can do this by refinancing the loans in your name or applying for co-signer release, depending on which type of loan your parent has.
At least 2 weeks before any loan transfer, your current loan servicer will send you an email or letter notifying you that your loans are being transferred to another loan servicer. This initial notice will include your new servicer's name and contact information.
You cannot transfer the loan to a child or even the student who used the money for school. Parents must repay the loan according to the repayment terms agreed upon when the loan was taken out.
Is it better to get a student loan or a parent loan?
Parent PLUS Loans typically have higher interest rates than a student's federal student loans. This means that over the life of the loan, you could end up paying significantly more in interest with a Parent PLUS Loan compared to a federal student loan taken out by a student.
| State | Average student loan debt |
|---|---|
| California | $37,211 |
| South Carolina | $36,981 |
| North Carolina | $36,885 |
| Delaware | $36,776 |
Only the student is obligated to repay these loans. Parents are not responsible for repaying their children's federal student loans and cannot cosign these loans. If the child defaults on a federal student loan loan, only the child's credit is ruined.
Yes, you can pay off your child's student loans. But, depending on the amount, there may be tax implications.
Yes, you can remove a cosigner from a student loan. Some (but not all) lenders offer what's called a "cosigner release," in which the cosigner can drop off the loan if certain conditions are met. In the case that the lender does not offer this option, you can remove a cosigner by refinancing the cosigned loan.
You can't pay student loan debt directly, but you could always gift money to cover the debt to your grandchildren. Again, because the FAFSA has a two-year lookback, grandparents should wait until after the grandchild's sophom*ore year or after the grandchild graduates to help pay student loans.
Eventually, your student loans will be put into default and you may lose federal loan benefits, have your wages garnished, get barred from federal student aid among other consequences. Your loan holder may sue you, as well. If you ignore the court date or the court's orders — that could land you in jail.
Why did my student loans disappear from my credit report? Your student loan disappeared from your credit report because your loan servicer made a mistake, or you fell into default more than 7 years ago. Remember, even if your loans no longer appear on your credit report, you're still legally obligated to repay them.
No, you can't go to jail for not paying your student loans. So if that was a fear you had, take a deep breath—no one is coming to arrest you if you miss a payment. But like we mentioned, you can be sued over defaulted student loans. This would be a civil case—not a criminal one.
Yes, federal student loans may be forgiven after 20 years under certain circ*mstances. But only certain types of loans are eligible for forgiveness, and you must be enrolled in a qualifying repayment plan. You'll also need to stay out of default on your loans.
What happens to unpaid student loans after 25 years?
The remaining unpaid balance of loans is forgiven after 25 years. Income-Based Repayment (IBR)—Depending on when you first took out loans (before or on or after July 1, 2014), payments are generally 10% or 15% of the borrower's discretionary income, but never more than the 10-year Standard repayment plan amount.
Income-Driven Repayment (IDR) Forgiveness
An IDR plan bases your monthly payment on your income and family size. If you repay your loans under an IDR plan, any remaining balance on your student loans will be forgiven after you make a certain number of payments over 20 or 25 years.
How much can I borrow? The maximum PLUS loan amount you can borrow is the cost of attendance at the school your child will attend minus any other financial assistance your child receives. The cost of attendance is determined by the school.
To get a federal student loan without a parent, provide financial information for only yourself on the FAFSA form. You will need the following documents when filling out the form as an independent student: Social Security card. State-issued ID, such as a driver's license.
In most cases, the borrower no longer had any outstanding student loan reported on their credit record in February 2023, suggesting the loan may have been paid off, discharged, or aged off the borrower's credit record.
References
- https://www.consumerfinance.gov/ask-cfpb/does-a-persons-debt-go-away-when-they-die-en-1463/
- https://www.nerdwallet.com/article/loans/student-loans/marriage-student-loans
- https://www.collegeraptor.com/paying-for-college/articles/student-loans/how-to-get-a-student-loan-with-no-or-bad-credit/
- https://www.savingforcollege.com/article/are-parent-loans-eligible-for-student-loan-forgiveness
- https://www.sparrowfi.com/blog/how-to-get-a-student-loan-with-bad-credit
- https://finaid.org/loans/ibr/
- https://www.consumerfinance.gov/paying-for-college/student-loan-forgiveness/
- https://www.bankbazaar.com/education-loan-interest-rate.html
- https://www.lendingtree.com/student/parent-plus-loan-forgiveness/
- https://www.moneywiselaw.com/federal-student-loans-parents/
- https://www.fool.com/student-loans/guides/student-loans-after-death/
- https://www.bankrate.com/loans/student-loans/bad-credit-loans/
- https://www.lendingtree.com/student/spouse-responsible-for-debt-marriage/
- https://www.britannica.com/money/parent-plus-loan-loophole
- https://www.usatoday.com/money/blueprint/credit-cards/what-happens-to-credit-card-debt-after-you-die/
- https://www.lendingtree.com/student/how-to-pay-for-college-without-parents-help/
- https://www.bursar.psu.edu/faq/why-did-i-not-get-my-federal-direct-plus-refund
- https://studentaid.gov/articles/4-things-to-know-about-marriage/
- https://studentaid.gov/help-center/answers/article/what-is-current-interest-rate-for-direct-plus-loans
- https://www.bankrate.com/loans/student-loans/who-is-responsible-for-student-debt/
- https://www.taxry.com/blog/irs-know-you-give-gift
- https://www.mos.com/blog/fafsa-income-limits/
- https://www.experian.com/blogs/ask-experian/can-anyone-get-student-loans/
- https://www.savingforcollege.com/article/what-do-i-do-if-my-federal-parent-plus-loan-is-denied
- https://www.getearlybird.io/blog/loan-to-family-member-tax-implications
- https://www.savingforcollege.com/article/how-to-pay-for-college-without-student-loan-debt
- https://www.tateesq.com/learn/spouse-responsible-student-loans-incurred-before-marriage
- https://blog.prepscholar.com/pell-grant-eligibility-and-requirements-do-you-qualify
- https://www.salliemae.com/college-planning/financial-aid/fafsa/fafsa-guide/fafsa-household-size/
- https://lendedu.com/blog/denied-student-loan/
- https://www.bankrate.com/loans/student-loans/student-loan-debt-by-generation/
- https://www.bankrate.com/mortgages/transfer-mortgage/
- https://www.justice.gov/usao-mt/pr/university-great-falls-student-sentenced-six-month-custody-fafsa-fraud
- https://www.experian.com/blogs/ask-experian/can-a-student-loan-application-be-denied/
- https://www.consumerfinance.gov/about-us/blog/initial-fresh-start-program-changes-followed-by-increased-credit-scores-for-affected-borrowers/
- https://www.hrblock.com/tax-center/income/other-income/someone-else-pays-your-student-loans/
- https://www.studentloanplanner.com/transfer-student-loans-another-person/
- https://studentaid.gov/apply-for-aid/fafsa/filling-out/parent-info
- https://www.tateesq.com/learn/can-inheritance-garnished-student-loans
- https://www.forbes.com/advisor/personal-loans/how-to-get-a-loan-with-bad-credit-and-no-cosigner/
- https://www.oceansidedivorcelawyer.com/articles/2022/december/who-pays-student-loan-debt-in-a-divorce-/
- https://www.lendingtree.com/student/student-loans-good-bad-debt/
- https://www.financialsamurai.com/financial-aid-when-making-multiple-six-figures/
- https://www.tateesq.com/learn/defaulted-student-loans-not-on-credit-report
- https://studentaid.gov/articles/student-loan-forgiveness/
- https://www.businessinsider.com/personal-finance/average-american-debt
- https://www.schwab.com/learn/story/family-loans-should-you-lend-it-or-give-it-away
- https://scholarships360.org/financial-aid/why-didnt-i-get-any-financial-aid/
- https://www.ramseysolutions.com/debt/parent-plus-loan-forgiveness
- https://fsapartners.ed.gov/knowledge-center/fsa-handbook/2023-2024/vol8/ch4-annual-and-aggregate-loan-limits
- https://www.lendingtree.com/student/parent-plus-loan-transfer-to-student/
- https://www.metlife.com/stories/legal/can-you-inherit-debt/
- https://studentaid.gov/articles/plus-loans-denied-adverse-credit/
- https://ca.db101.org/ca/programs/income_support/student_aid/pell/program2.htm
- https://sojo.net/articles/debt-forgiveness-core-principle-christianity
- https://www.lendingtree.com/student/what-happens-to-student-loans-when-you-die/
- https://educationdata.org/student-loan-debt-by-age
- https://www.oregonlive.com/taxes/2010/02/post_143.html
- https://www.marketwatch.com/guides/insurance-services/what-debts-are-forgiven-at-death/
- https://www.nerdwallet.com/article/loans/student-loans/how-to-get-your-parent-off-the-hook-for-your-student-loans
- https://www.consumerfinance.gov/paying-for-college/repay-student-debt/federal-parent-plus-loans/
- https://www.bankrate.com/loans/student-loans/pay-for-college-fast/
- https://www.sparrowfi.com/blog/student-loan-vs-parent-loan-which-is-better
- https://www.forbes.com/advisor/student-loans/fafsa-income-limits/
- https://www.credible.com/refinance-student-loans/student-loan-forgiveness-20-years
- https://www.sparrowfi.com/blog/what-married-couples-need-to-know-about-student-loan-forgiveness
- https://www.ramseysolutions.com/debt/what-happens-if-you-dont-pay-student-loans
- https://www.wgbh.org/news/education-news/2023-09-08/other-countries-show-student-loans-can-be-simple-and-humane
- https://cricpa.com/insight/lending-money-to-family-irs/
- https://www.lendingtree.com/personal/familial-financing/
- https://www.kpmcpa.com/consider-intrafamily-loan-forgiveness/
- https://www.bankrate.com/loans/student-loans/how-to-get-student-loan-without-parent/
- https://www.kiplinger.com/taxes/gift-tax-exclusion
- https://www.nerdwallet.com/article/loans/student-loans/parent-plus-loan-eligibility
- https://studentaid.gov/understand-aid/types/loans/plus/parent
- https://studentaid.gov/articles/financial-aid-not-enough
- https://www.investopedia.com/how-to-get-a-student-loan-without-your-parents-7254095
- https://blog.taxact.com/family-loans-lend-my-kids-money/
- https://studentaid.gov/understand-aid/eligibility
- https://smartasset.com/taxes/give-daughter-50k-for-down-payment
- https://www.businessinsider.com/typical-student-loan-borrower-balance-millennial-woman-debt-relief-biden-2023-11
- https://www.consumerfinance.gov/paying-for-college/choose-a-student-loan/
- https://www.lendingtree.com/student/private-student-loan-forgiveness/
- https://www.nerdwallet.com/article/loans/student-loans/do-student-loans-affect-your-credit
- https://www.citizensbank.com/learning/how-much-debt-is-too-much.aspx
- https://www.consumerfinance.gov/ask-cfpb/do-student-loans-affect-my-credit-score-en-581/
- https://www.bestcolleges.com/research/how-long-to-pay-off-student-loans/
- https://bigfuture.collegeboard.org/pay-for-college/scholarships-grants-loans/loans/quick-guide-which-college-loans-are-best
- https://www.moneyhelper.org.uk/en/everyday-money/credit/identity-theft-and-scams-what-you-are-liable-for
- https://money.com/consequences-not-paying-student-loans/
- https://studentaid.gov/articles/subsidized-vs-unsubsidized-loans/
- https://www.mooneyesq.com/blog/2023/04/is-it-a-crime-to-take-out-credit-in-your-childs-name/
- https://www.marinerwealthadvisors.com/insights/what-are-the-implications-of-a-loan-versus-a-financial-gift-to-a-family-member/
- https://studentaid.gov/help-center/answers/article/what-happens-if-i-do-not-pay-back-student-loan
- https://www.forbes.com/advisor/student-loans/biggest-fafsa-questions/
- https://www.sparrowfi.com/blog/fafsa-requirements-everything-you-need-to-know
- https://www.sofi.com/learn/content/what-happens-if-someone-pays-my-student-loans/
- https://finance.yahoo.com/news/monthly-payment-20-000-student-112728748.html
- https://www.kiplinger.com/article/retirement/t042-c000-s004-how-to-help-grandchildren-pay-for-college.html
- https://money.com/should-i-cosign-private-student-loan/
- https://www.lendingtree.com/student/how-to-get-financial-aid-if-your-parents-make-too-much/
- https://www.usnews.com/education/blogs/student-loan-ranger/articles/how-marriage-can-affect-your-student-loans
- https://www.fastweb.com/financial-aid/articles/does-filing-a-fafsa-obligate-you-in-any-way-are-parents-responsible-for-repaying-a-child-s-student-loans
- https://studentaid.gov/debt-relief-announcement
- https://www.investopedia.com/articles/personal-finance/022416/worst-things-can-happen-if-you-dont-pay-your-student-loans.asp
- https://www.nerdwallet.com/article/loans/personal-loans/family-loans
- https://www.bestcolleges.com/resources/financial-aid-felony/
- https://www.chase.com/personal/education/student/paying-for-college/what-happens-with-lie-on-fafsa
- https://www.edelmanfinancialengines.com/education/financial-planning/lending-money-to-family-or-friends/
- https://www.findlaw.com/realestate/mortgages-equity-loans/home-loans-from-family-and-friends.html
- https://www.forbes.com/advisor/student-loans/best-private-student-loans/
- https://www.lendingtree.com/student/how-to-refinance-student-loans/
- https://www.nerdwallet.com/article/loans/student-loans/student-loan-debt
- https://www.cnn.com/cnn-underscored/money/average-student-loan-debt
- https://www.edvisors.com/student-loans/repay-student-loans/federal/parent-plus-loan-forgiveness/
- https://www.gafutures.org/college-planning/college-money-matters/choosing-a-major/debt-to-salary-ratio/
- https://www.nerdwallet.com/article/loans/student-loans/parent-plus-loans-repayment
- https://www.savingforcollege.com/article/is-there-an-income-cutoff-on-eligibility-for-financial-aid
- https://www.forbes.com/sites/robertfarrington/2020/02/18/student-loan-tax-garnishments-what-you-should-know/
- https://studentaid.gov/articles/your-loan-was-transferred-whats-next/
- https://studentaid.gov/articles/financial-aid-not-enough/
- https://www.fool.com/student-loans/2023/09/02/2-reasons-student-loans-are-so-difficult-to-pay-of/
- https://www.nerdwallet.com/article/loans/student-loans/student-loan-repayment-plans
- https://www.cohencpa.com/knowledge-center/insights/march-2022/tax-ramifications-of-gifting-and-loaning-money-to-family-members
- https://www.bankrate.com/loans/student-loans/credit-score-for-student-loans/
- https://www.tateesq.com/learn/what-happens-student-loans-death
- https://hwllp.cpa/how-to-set-up-an-irs-approved-family-loan/
- https://www.gao.gov/blog/student-loan-payment-pause-ends-income-driven-repayment-plans-may-help-borrowers
- https://www.marca.com/en/lifestyle/us-news/personal-finance/2024/02/06/65c27c07e2704e739e8b45c5.html
