When a parent dies, the emotional toll is often accompanied by a whirlwind of logistical and financial concerns, including questions about outstanding debts. One common concern among families is the fate of Parent PLUS loans, which are federal loans taken out by parents to help pay for their children’s education. If you are a borrower or family member of someone with a Parent PLUS loan, you may wonder, “What happens to the loan when the parent passes away?”
In this comprehensive guide, we’ll explore the details of Parent PLUS loans, what happens to them when the parent borrower dies, and the steps that family members or co-signers need to take to resolve the debt. We will also address potential options for those who are struggling with Parent PLUS loans after a parent’s death.
1. Understanding Parent PLUS Loans
Before diving into the specifics of what happens to Parent PLUS loans after a parent dies, it’s important to understand what these loans are and how they work.
What Are Parent PLUS Loans?
A Parent PLUS loan is a federal student loan made to the parents of dependent undergraduate students. Unlike other federal student loans, the borrower for a Parent PLUS loan is the parent, not the student. The loan is taken out to cover the cost of the child’s education, and the parent is responsible for repaying the loan, including any interest that accrues.
- Eligibility: To qualify for a Parent PLUS loan, the parent must be the biological, adoptive, or in some cases, step-parent of a dependent student. The student must also be enrolled in at least half-time in a degree-granting program.
- Loan Terms: Parent PLUS loans typically have a fixed interest rate set by the federal government, and repayment generally begins immediately, though some parents may defer payments until after the student graduates.
- Loan Amounts: Parent PLUS loans can be used to cover the total cost of education, including tuition, fees, and room and board, minus any other financial aid the student receives.
Repayment of Parent PLUS Loans
Unlike other federal student loans, Parent PLUS loans are the sole responsibility of the parent borrower. Parents are expected to repay these loans, even if the student has graduated or is no longer enrolled. The parent is also responsible for any accrued interest and fees associated with the loan.
2. What Happens to Parent PLUS Loans When a Parent Dies?
When a parent who has taken out a Parent PLUS loan passes away, the loan is generally discharged. This is one of the few instances where a federal student loan can be discharged due to the borrower’s death. Here’s a closer look at how the process works:
1. Discharge of the Loan Due to Death
Under the U.S. Department of Education’s regulations, the Parent PLUS loan is discharged upon the death of the borrower. This means that the surviving family members, including the student, are no longer responsible for repaying the loan.
- Federal Student Loan Discharge: If the parent who took out the loan dies, the loan will be forgiven, and no further payments will be required. This applies only to the parent borrower and does not extend to any co-signers, as Parent PLUS loans typically do not require a co-signer.
- Documentation Requirements: In order to initiate the discharge process, the surviving family members must submit appropriate documentation to the loan servicer. Typically, this will include a death certificate of the parent borrower.
2. Student’s Loan Liability
It’s important to note that the student for whom the Parent PLUS loan was taken out is not liable for the loan. The student is not responsible for repaying the Parent PLUS loan even after the death of the borrower. The loan was issued in the parent’s name, and the responsibility for repayment lies with the parent alone.
If the parent dies and the loan is discharged, the student is not held accountable for any remaining balance. However, if there is any outstanding debt or interest, the loan servicer will apply the discharge and cancel the balance.
3. Other Federal Student Loans
In cases where the parent also has other federal student loans, such as Direct Subsidized or Unsubsidized Loans, the treatment of those loans may differ. Typically, federal loans taken by the student (not the parent) would not be discharged upon the parent’s death. The student would still be responsible for those loans unless the student themselves passes away, in which case, the student loans would be eligible for discharge.
3. Steps to Take After the Parent Dies
If a parent with a Parent PLUS loan passes away, it’s important for family members or survivors to understand the steps to take to ensure that the loan is properly discharged.
1. Notify the Loan Servicer
The first step in the process is to notify the loan servicer that the borrower has passed away. The loan servicer is the organization that manages the loan, and they will be able to provide instructions on how to proceed with the discharge process.
To notify the loan servicer:
- Contact the servicer by phone or online through the official website.
- Provide the necessary documentation, which typically includes a death certificate. The death certificate should include the date of death and other relevant details to verify that the borrower has passed away.
After notifying the servicer and submitting the required documents, the servicer will begin the process of discharging the loan.
2. Submit a Death Certificate
A death certificate is the most important document needed for the discharge process. It must be an official, certified copy of the certificate, as this is used to confirm that the parent has passed away. The death certificate will need to be submitted to the loan servicer as part of the documentation required to begin the discharge process.
3. Loan Discharge Processing
Once the loan servicer receives the death certificate and any other required documentation, they will initiate the discharge process. The servicer will review the documents, and upon verification, the loan will be discharged. The remaining balance of the loan will be canceled, and the family will no longer be liable for repayment.
It may take several weeks for the loan servicer to process the discharge and update the loan status. During this time, it’s important to stay in touch with the servicer and ensure that all necessary documents have been submitted.
4. Check for Any Remaining Debts
Even though the Parent PLUS loan will be discharged, it’s important to check if there are any outstanding interest payments or other fees associated with the loan. Sometimes, loans can accrue interest or penalties that need to be addressed, even after death. The servicer should be able to clarify whether any payments or final settlements are required before the loan is fully discharged.
4. What If the Parent PLUS Loan Is in Default?
In cases where the parent borrower was in default on their Parent PLUS loan before death, the loan may still be eligible for discharge upon death, but additional steps may be needed. If the loan is in default, it’s important to work with the loan servicer to ensure the discharge is processed correctly.
- Federal Loans in Default: If the Parent PLUS loan is in default, the loan servicer may require additional paperwork or proof of the default status.
- Collections: If the loan had been sent to collections, the discharge process could take longer, but the loan can still be discharged upon the death of the borrower.
1. Consolidation Loans
If the Parent PLUS loan was consolidated into a Direct Consolidation Loan, the discharge process may apply to the consolidated loan, but the survivor will need to work with the servicer to ensure the consolidation loan is discharged properly.
5. What Happens If the Loan Is Not Discharged?
In the rare event that the loan servicer does not discharge the loan after the parent’s death, it’s important to follow up with them to ensure that all the required documentation has been received and that the discharge process is complete. If problems persist, family members can escalate the issue by contacting the U.S. Department of Education’s Federal Student Aid office for assistance.
6. Frequently Asked Questions (FAQs)
1. Can I transfer the Parent PLUS loan to the student after the parent dies?
No, Parent PLUS loans cannot be transferred to the student, even if the parent dies. The loan is in the parent’s name, and if the parent dies, the loan is eligible for discharge.
2. Does the student have to pay the loan if the parent dies?
No, the student is not responsible for paying the loan after the parent’s death. The loan is discharged upon the death of the parent borrower.
3. What if the loan is not discharged promptly?
If the loan is not discharged promptly, the survivor should contact the loan servicer to verify the status and ensure that all required documentation has been submitted. If needed, escalate the issue with the Federal Student Aid office.
7. Conclusion
Losing a parent is difficult enough without the added worry of navigating student loan responsibilities. Fortunately, Parent PLUS loans are eligible for discharge upon the death of the parent borrower, meaning the loan balance is canceled, and the surviving family members are not responsible for repayment. To ensure a smooth process, it’s important to notify the loan servicer, provide a death certificate, and follow up if necessary. By understanding the process and taking the necessary steps, families can relieve some of the financial stress that may arise during an already challenging time.
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