Question: What happens to your student loan debt when you die?

You answered a question on the air from a young soon to be married person regarding life insurance. You advised that the standard 1x salary being offered by his employer is probably "enough", but you never asked if he had any outstanding debts. What for example, happens to student loan debt if a person dies? I'm aware that student loan debt can't be discharged in bankruptcy, but can it be discharged in death? Would a surviving spouse then be responsible for the student loan debt? Other debt, I am certain would become the responsibility of the surviving spouse, such as a car loan or credit card debt, but I have no idea what happens with student loan debt...Shouldn't debt also be considered when considering life insurance? We always hear about how do want to "take care of" after death, such as funeral expenses, and supporting our survivors' life style for a period of time or if there's children helping them to pay for their education, but I've never hear anyone speaking of discharging the debt as something that also needs to be "taken care of".

Response:

Though I wasn't the original person to answer your question, here's my dos centavos.   Life insurance is mostly there to help those who depend on you.  What kind of money will they (or he or she) need should you leave this earth to maintain your current lifestyle?  But, it's not only for that.  Though children do not inherit the debts of their parents, married spouses and any joint account holders usually do.  Funds to pay off debts such as student loans or credit cards come out of the deceased's estate.  So, if you have a spouse and two kids, you're the main wage-earner who is also carrying thousands in student loan debt, I would absolutely get enough life insurance coverage -- stick with a term policy if cost is an issue -- to not only take care of household expenses for a long while but to also pay off those student loans.  However, if you do not have anyone depending on you and your income, you don't need life insurance to cover your student loan.  The debt comes out of your estate -- if you leave no estate and no joint or co-signers, you're in the clear.  

That's one way to get rid of student loan debt.  Oy!

 

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