Understanding the Fate of Parent Plus Loans- Are They Forgiven Upon the Borrower’s Death-

Are Parent Plus LoansForgiven at Death?

Parent Plus loans, a type of federal student loan, are designed to help parents finance their children’s education. These loans are popular among families seeking to ease the financial burden of higher education. However, many borrowers wonder what happens to these loans in the event of the borrower’s death. The answer to this question is both straightforward and complex, depending on various factors.

Firstly, it is important to note that Parent Plus loans are not automatically forgiven at death. Unlike federal student loans for undergraduate students, Parent Plus loans are not dischargeable in bankruptcy without a showing of undue hardship. This means that if the borrower passes away, the loan typically remains in the estate and must be repaid.

However, there are certain exceptions to this rule. If the borrower dies, the remaining balance on the Parent Plus loan may be discharged if the loan is included in the borrower’s estate and the estate’s total value is less than the amount of the loan. In this case, the loan is forgiven, and the estate’s creditors are not entitled to any portion of the loan amount.

Another exception occurs when the borrower’s death is due to the borrower’s disability or injury. If the borrower becomes totally and permanently disabled before the loan is repaid, the remaining balance may be discharged. This exception is designed to provide relief to borrowers who are unable to work and repay their loans due to a disability.

It is also worth mentioning that if the borrower has a co-signer on the Parent Plus loan, the co-signer may be responsible for repaying the loan in the event of the borrower’s death. This is because co-signers are legally obligated to repay the loan if the borrower fails to do so. Therefore, it is crucial for borrowers to discuss their loan obligations with their co-signers and ensure that they understand the implications of co-signing.

In conclusion, while Parent Plus loans are not automatically forgiven at death, there are exceptions that may provide relief to borrowers and their families. Borrowers should be aware of these exceptions and consider them when taking out Parent Plus loans. Additionally, borrowers should communicate openly with their co-signers to ensure that everyone understands the responsibilities and obligations associated with these loans.