Thursday, August 6, 2015

Student Loan Relief: What Happens If The Borrower Dies?

Most student loan holders are busy looking for some form of student loan relief through restructuring and refinancing. Student consolidation loans have become popular in the midst of millions of people financing their education only to find they can't get a well-enough paying job out of college to make their payments. With the recent threat of interest rates on federal loans doubling for those taking out loans in the new school year, loan holders are scrambling to figure out how to pay for the costs associated with post-secondary education.

It's one thing to worry about how to make your payment every month but have you ever questioned what would happen to your post-college debt should you die? That's a bit of a loaded question... but one that definitely has an answer. Yes, student loan relief may come with the passing away of the loan holder.

In the case of traditional loans, if the borrower's spouse is not listed as a co-signer or joint account holder on the loan, he or she will not be held legally liable for the debt. It's a different story, though, if you live in a community property state. Community property states atuomatically grant 50/50 to married couples; even when it comes to debt. It's not the same with a educational loans, though.

With a federally backed college loan, part of your federal loan student rights is that should you pass away, your spouse is not liable for what you owe. In fact, your loan is automatically cancelled and the government will discharge any remaining debt. Private loans are different, though.

Private lenders like Sallie Mae, Well Fargo and New York HESC's do offer death and disability forgiveness policies but they are the exception to the rule when it comes to private student loan lenders. It's always best to check with the private lender to see if they offer death discharge protections.

Most private lenders will first attempt to collect a debt from the estate of the borrower. If unsuccessful because there is no estate, they will then look to the co-signer on the loan for repayment. If there is no co-signer then they will turn to the spouse for collecting on the debt. It does depend, though, on whether or not the collection is being pursued in a community property state. Even so, some states with community property have provisions in place to release a spouse from being liable to repay their spouses student loan debt.

The bottom line? If you are not a co-signer and/or do not live in a community property state, you won't be held responsible for your deceased spouses student loan debt. Be mindful to look into the laws of your particular state should you reside in one with community property.

One last thing to remember when thinking about student loan relief in regards to the death of a spouse; tax repercussions may be assessed on forgiven debts - even those loans that have canceled due to the death or disability of the loan holder.

If you are looking for student loan help, National Student Loan Relief (NSLR) is the right place to start. We work hand-in-hand with the Department of Education to efficiently relieve Federal student loan debt. Visit National Student Loan Relief at http://www.nslrelief.com/ for more information.

Article Source: http://EzineArticles.com/?expert=Laura_J_Solomon



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