Types of Loans: - Federal Student Loans: If a parent took out a federal Parent PLUS loan, they are legally responsible for repaying that loan, regardless of whether the child has graduated or is able to pay. However, there are options for deferment or forbearance in certain situations.
A Direct PLUS Loan made to you as a parent cannot be transferred to your child. You are responsible for repaying the loan. Can I ever postpone making loan payments? Yes, under certain circumstances you may receive a deferment or forbearance, which allows you to temporarily stop or lower your payments.
The loans remain in the Parent's name. They aren't passed down to the child.
You MUST make your federal student loan payments on time and they must be paid in full. It is your responsibility to make the payments even if you do NOT receive a notice from a servicer.
Generally, parents are not liable for repaying federal student loans taken on by a student. This includes direct subsidized loans, direct unsubsidized loans, direct PLUS loans made to graduate or professional students, direct consolidation loans, and Perkins loans.
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.
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.
It may come as a relief to find out that, in general, you are not personally liable for your parents' debt. If they pass away with debt, it is repaid out of their estate. However, this means that debt repayment could diminish or eliminate assets and property you could have inherited from your parents.
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.
You can get student loans without parents if you're classified as an independent student or, in some cases, a dependent student.
An adult child who inherits a home that has a reverse mortgage would need to pay off the balance to keep the home, though they're not legally obligated to do so.
Your Last Resort: Private Loans
These loans have different repayment options than federal loans and will most likely cost you more in interest. Also, they may not have the same kinds of protections in case of disability or death as do the federal loans. Private loans generally should be taken out only as a last resort.
When the time comes to start making payments, only the student is obligated to repay these loans — not the parents. In fact, there's no co-signer. If the student defaults on a federal student loan, it will affect the student's credit and won't be reported on the parent's credit history.
The student is responsible for the repayment. If a parent cosigns the loan -- common for private student loans -- the parent will also be responsible for repayment. Parent loans often have a higher interest rate than federal student loans. They have less flexible payment terms, and they require a credit check.
Are parents legally obligated to pay for college? State law rules that the obligation to financially support your kids ends when the child turns 18. That means parents have no legal obligation to pay for their child's college education — with one exception.
No one inherits your student loans if you die, but private lenders can seek repayment from your estate, a cosigner (for loans taken out before Nov. 20, 2018), or your spouse if you took out the debt during your marriage and you live in a community property state.
No, parents are not generally responsible for an adult child's medical debts, said Richard Gundling, senior vice president at the Healthcare Financial Management Association, an organization for finance professionals in health care.
In most cases, the deceased person's estate is responsible for paying any debt left behind, including medical bills. If there's not enough money in the estate, family members still generally aren't responsible for covering a loved one's medical debt after death — although there are some exceptions.
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.
While many private lenders offer a discharge upon the borrower's death, this is not guaranteed and can vary based on the loan agreement. If a private student loan does not automatically discharge, the debt may become part of the deceased's estate and could be paid from the estate's assets during probate.
Credit card debt doesn't go away when the cardholder passes away. It must be repaid from your estate, which means your loved ones may receive a reduced inheritance — or no inheritance at all. Related: What happens to a bank account when somebody dies?
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.
The average student loan payment is between $200 and $299, according to the most recent available data from the Federal Reserve.
If you are delinquent on your student loan payment for 90 days or more, your loan servicer will report the delinquency to the national credit bureaus, which can negatively impact your credit rating. If you continue to be delinquent, you risk your loan going into default.