Student Loan Cosigner Dies – is Their Estate Responsible?

Getting money for college is no easy task. Scholarship applications take a lot of time and usually only go to the academic or athletic cream of the crop. Grants are hard to come by and only the lowest-income students receive these. Many students take out student loans, but due to low or no credit, they need a cosigner. What happens when a student loan cosigner dies? That depends on the type of loan the student got.

College students can apply for federal loans and private loans. Federal loans only require a cosigner if the student is under 24 years old at the time of application. These loans are paid back by the student, and the cosigner is never responsible for these loans. These are typically the undergraduate Stafford Loans for a dependent student. If the student loan cosigner dies, their estate is not responsible for the loan, and no legal action can be taken against them. The same is true if the student dies. With a Stafford Loan, this type of loan is forgiven if the student passes away and their estates are not held responsible.

Private loans are a different story but these are harder to come by. Sometimes, the amount of tuition is such that it exceeds all of the monies allotted by the federal loan programs. In these cases, students may need to obtain a private loan. The problem with this is that a student is often just starting out in the world, and may not have enough credit established to get a private loan. In these situations, the student may need to obtain a cosigner. These loans work the same way as any other private loan from a bank like a home loan or a car loan. The cosigner is equally responsible for repayment of the loan, because they used their credit score and income as good faith that the loan would be repaid. If a student loan cosigner dies, they are not automatically responsible to repay the loan unless the loan is in default, but even then, it is not typical for estates to be responsible for debts.

Getting a cosigner is something that a lot of students need. If a student loan cosigner dies, this can be a tricky situation, but only if the payments of the loan are not being made. Typically, deceased persons are not penalized for a cosigners’ inability to pay.

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