No, student loans (and debt in general) can never be ``passed'' to a third party who didn't co-sign on the debt. Some types of student loans (including federal loans) are discharged upon the death of the borrower. Many private loans (like other kinds of consumer debt) become the responsibility of the estate.
What happens to my loans if I die? If you die, then your federal student loans will be discharged after the required proof of death is submitted.
Asset protection trust
Trusts can help protect assets from various risks and potential threats including creditors, lawsuits, bankruptcy, and estate taxes. When assets are transferred into a trust, they are no longer owned by the individual (the settlor) but are instead owned by the trust itself.
But if you stop making payments and your loans default, a student loan lawsuit could be filed against you. If that happens and the court enters judgment against you, then any funds in your bank account — including your inheritance — could be levied or taken to repay the debt.
If a borrower dies, their federal student loans are discharged after the required proof of death is submitted. The borrower's family is not responsible for repaying the loans.
California law does allow creditors to pursue a decedent's potentially inheritable assets. In the event an estate does not possess or contain adequate assets to fulfill a valid creditor claim, creditors can look to assets in which heirs might possess interest, if: The assets are joint accounts.
Key Takeaways. Parents are not obligated to repay their child's federal student loans, even though their information is required for the Free Application for Federal Student Aid (FAFSA). Parents may be held responsible for student loan debt if they co-signed a private loan or took out a parent PLUS loan.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income.
The SSA does not count certain loans as assets, such as the following: Student loans, federal education loans, or any loan made under Title IV of the Higher Education Act. Bank Loans – SSA will not consider the cash received from a loan as income.
Student loans don't go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and wondered, “why did my student loans disappear?” The answer is that you have defaulted student loans.
Medical debt and hospital bills don't simply go away after death. In most states, they take priority in the probate process, meaning they usually are paid first, by selling off assets if need be.
As a result, student loans can't take your house if you make your payments on time. However, if you miss enough student loan payments, your accounts will first move into delinquency status and then into default status. Once you default on student loans, you're at risk of having your house taken to pay them back.
You are not responsible for your parents' debt. This is true regardless of whether you inherit assets under their estate. However, a parent's estate must settle any debts before you can inherit. And children often share financial responsibilities with aging parents, often medical and housing costs.
Federal student loans can be discharged after the borrower's death, and the borrower's family is not responsible for the debt. Parent PLUS loans are discharged upon the death of the student, relieving the parent of repayment obligations.
Impact on Co-signers and Guarantors
If the borrower passes away, the responsibility for repaying the loan immediately transfers to the co-signer or guarantor. This shift in obligation occurs as soon as they contact the bank or financial institution to continue the repayment process.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
Therefore, inheritances do not impact eligibility, and no reporting requirements exist for inheritances or assets received. Before assuming an inheritance will forfeit your benefits, check which program you receive—SSI or SSDI.
Student loans in the U.S. are generally either owned by the federal government or financial institutions. The federal government fully guarantees almost all student loans. Some student loans are held by agencies like Sallie Mae or a third-party loan servicing company.
Parent PLUS loans can be forgiven under the Income-Contingent Repayment (ICR) plan and Public Service Loan Forgiveness (PSLF) program. Parents can become eligible for these forgiveness programs only if they consolidate their PLUS loans into a Direct Consolidation Loan.
You can get student loans without parents if you're classified as an independent student or, in some cases, a dependent student.
The executor is responsible for notifying creditors of the deceased's death, and they generally have between three and six months to make a claim. The executor is not responsible to personally pay any of the estate's debts unless they were a co-signer or joint owner.
A beneficiary's inheritance can be protected from lawsuits and creditors by receiving it in trust (as opposed to outright). This can make it extremely difficult for creditors to go after this money, even if insurance becomes insufficient to satisfy a judgement obtained by a lawsuit.
Collectors can contact relatives or other people connected to the deceased (who don't have the power to pay debts from the estate) to get the contact information of the deceased person's representatives.