Personal Finance
Here’s what happens to your student loan debt when you die
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It’s not unusual to hear people struggling with their student loan debt bemoan that they feel like they’ll be paying until they die. Which begs the question: What happens to the debt at that point?
It may be a question increasingly on people’s minds, as the number of older student loan borrowers trends upward. There were 2.8 million people 62 and older who still carried student loan debt in the second quarter of 2024, up from 1.7 million borrowers in that age cohort in 2017, according to new data from the U.S. Department of Education.
This isn’t just a risk for older borrowers, either. Some financial experts recommend that families take out life insurance — to cover any remaining debt — even on younger borrowers with private or co-signed debt. Additionally, if your loan doesn’t discharge, some experts suggest refinancing to add a discharge policy
“We have worked with many families that have suffered the loss of a loved one who held student loans,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
Here’s what you need to know in such cases.
Federal student loans die with you
Fortunately, no one will be responsible for your federal education debt when you’re gone, said higher education expert Mark Kantrowitz.
“Federal student loans die with the borrower,” Kantrowitz said.
Any Parent PLUS loans will be discharged if the parent holding the loans dies, or if student for whom the parent borrowed dies, he added. Someone who has “endorsed” a Parent PLUS loan, which is similar to the co-signing process on a private loan, does not become responsible for the debt if the parent or student dies.
Those who’ve lost someone with student debt should ask the borrower’s loan servicer what proof they’ll need to discharge it, Mayotte said. (An original death certificate or a certified copy of the death certificate will likely be acceptable documentation, according to the U.S. Department of Education.)
While the family gathers this information, the borrower’s account should be placed on hold for 60 days, Mayotte said. If you’re unsure of the borrower’s loan servicer, you may be able to find out at Studentaid.gov.
“There are currently no taxes on this discharge, so the deceased’s estate would be free and clear of the debt,” Mayotte added.
With private student loans, responsibility is murkier
Some lenders of private student loans will cancel the debt if a borrower dies, but it is not guaranteed, Kantrowitz said. “About half of private student loans have a death discharge and about half do not,” he said. (On Kantrowitz’s website, PrivateStudentLoans.guru, he tries to keep track of different lenders’ policies.)
If the lender doesn’t offer a death discharge option, anyone who has co-signed on that loan can be held liable, Mayotte said. Even if there is no co-signer, there can be situations in which the deceased person’s estate would be held responsible for the private student loan, she added.
“In no case would family members be liable outside of the estate,” Mayotte said.
Even if a lender doesn’t offer a death discharge, someone who co-signed the loan might want to call the company and explain your situation if it would be difficult to repay it, Kantrowitz said. If you have health issues or are on a fixed income, you’ll want to point that out, he added.
“The family should contact the lender’s ombudsman to ask for a compassionate review,” Kantrowitz said. “The lenders don’t want bad press.”
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A number of states have passed protections for co-signers of private student loans, and it’s worth checking what rights you might be entitled to, experts add.
Maine Senate Majority Leader Eloise Vitelli, a Democrat, sponsored the state’s Student Loan Bill of Rights, which went into effect in 2019. The death of a woman with student loans prompted that legislation, Vitelli said. The woman’s parents reached out to Vitelli’s office, seeking help.
“They had a horrific story to tell about having co-signed their daughter’s student loans, not really knowing what they were getting into,” Vitelli said. “And then she died, and they were still being hounded by the loan servicer.”
— Additional reporting by Genna Contino.
Correction: Mark Kantrowitz’s website is PrivateStudentLoans.guru. An earlier version misstated the website’s name.
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Some states have stopped disbursing funds to consumers via Biden-era rebate programs tied to home energy efficiency, due to a Trump administration freeze on federal funding enacted in January.
The Inflation Reduction Act, passed in 2022, had earmarked $8.8 billion of federal funds for consumers through two home energy rebate programs, to be administered by states, territories and the District of Columbia.
Arizona, Colorado, Georgia and Rhode Island — which are in various phases of rollout — have paused or delayed their fledgling programs, citing Trump administration policy.
The White House on Jan. 27 put a freeze on the disbursement of federal funds that conflict with President Trump’s agenda — including initiatives related to green energy and climate change — as a reason for halting the disbursement of rebate funds to consumers.
That fate of that freeze is still up in the air. A federal judge issued an order Tuesday that continued to block the policy, for example. However, it appears agencies had been withholding funding in some cases in defiance of earlier court rulings, according to ProPublica reporting.
In any event, the freeze — or the threat of it — appears to be impacting state rebate programs.
“Coloradans who would receive the Home Energy Rebate savings are still locked out by the Trump administration in the dead of winter,” Ari Rosenblum, a spokesperson for the Colorado Energy Office, said in an e-mailed statement.
The U.S. Department of Energy and the White House didn’t return a request for comment from CNBC on the funding freeze.
In some states, rebates are ‘currently unavailable’
Consumers are eligible for up to $8,000 of Home Efficiency Rebates and up to $14,000 of Home Electrification and Appliance Rebates, per federal law.
The rebates defray the cost of retrofitting homes and upgrading appliances to be more energy efficient. Such tweaks aim to cut consumers’ utility bills while also reducing planet-warming carbon emissions.
California, the District of Columbia, Maine, Michigan, New Mexico, New York, North Carolina and Wisconsin had also launched phases of their rebate programs in recent months, according to data on an archived federal website.
All states and territories (except for South Dakota) had applied for the federal rebate funding and the U.S. Department of Energy had approved funding for each of them.
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The Arizona Governor’s Office of Resiliency said its Home Energy Rebates programs would be paused until federal funds are freed up.
“Due to the current federal Executive Orders, memorandums from the White House Office of Management and Budget, and communications from the U.S. Department of Energy, funding for all Efficiency Arizona programs is currently unavailable,” it said in an announcement Friday.
Rhode Island paused new applications as of Jan. 27 due to “current uncertainty” with Inflation Reduction Act funding and executive orders, according to its Office of Energy Resources.
The Georgia Environmental Finance Authority launched a pilot program for the rebates in fall 2024. That program is ongoing, a spokesperson confirmed Monday.
However, the timeline for a full program launch initially planned for 2025 “is delayed until we receive more information from the U.S. Department of Energy,” the Georgia spokesperson explained in an e-mail.
However, not all states have pressed the pause button: It appears Maine is still moving forward, for example.
“The program remains open to those who are eligible,” Afton Vigue, a spokesperson for the Maine Governor’s Energy Office, said in an e-mail.
The status of rebates in the eight other states and districts to have launched their programs is unclear. Their respective energy departments or governor’s offices didn’t return requests for comment.
‘Signs of an interest’
While the Trump administration on Jan. 29 rescinded its memo ordering a freeze on federal grants and loans — two days after its initial release — the White House said the freeze nonetheless remained in full force.
Democratic attorneys general in 22 states and the District of Columbia filed a lawsuit against the Trump administration, claiming the freeze is unlawful. The White House has claimed it is necessary to ensure spending aligns with Trump’s presidential agenda.
David Terry, president of the National Association of State Energy Officials, said he is optimistic the rebate funding will be released to states soon.
“For these two particular programs, I do not think [the freeze] will stymie the programs,” Terry said. “I see signs of an interest in moving them forward and working with the states to implement them.”
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Lump sum payments to begin arriving in February
In a new update released on Tuesday, the SSA said it will begin issuing retroactive payments in February. Most people will receive the one-time payment by the end of March, according to the agency.
The SSA plans to process the increase to monthly benefits starting in April.
The new timeline “supports President Trump’s priority to implement the Social Security Fairness Act as quickly as possible,” Social Security acting commissioner Lee Dudek said in a statement.
“The agency’s original estimate of taking a year or more now will only apply to complex cases that cannot be processed by automation,” Dudek said. “The American people deserve to get their due benefits as quickly as possible.”
Among those affected include some teachers, firefighters and police officers in certain states; federal employees who are covered by the Civil Service Retirement System and people who worked under foreign social security systems, according to the Social Security Administration.
What affected beneficiaries should know
Retroactive payments, which most people should receive by the end of March, will be deposited directly into bank accounts on file with the Social Security Administration.
All affected beneficiaries should receive a notice by mail from the Social Security Administration with details about their retroactive payment and new benefit amount. Those notices should come two to three weeks after the retroactive payments, according to the agency.
If your direct deposit information or current mailing address are up to date with the agency, no action is needed, according to the agency. If you want to double check the information the agency has on file, you may sign into your personal online account or call the agency.
If you want to ask about the status of your retroactive payment, the Social Security Administration urges you to hold off until April.
Beneficiaries should also wait until after they have received their April monthly check before contacting the agency to ask about their new benefit amount.
The average tax refund is 10.4% lower than last year according to the latest Internal Revenue Service data, and inflation is taking more of those dollars.
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The average tax refund this year is down 32.4% compared to last year, according to early filing data from the IRS.
Tax season opened on Jan. 27, and the average refund amount was $2,169 as of Feb. 14, down from $3,207 about one year prior, the IRS reported on Friday. That figure reflects current-year refunds only.
However, the Feb. 14 filing data doesn’t include refunds receiving the earned income tax credit or additional child tax credit, which aren’t issued before mid-February, the IRS noted. The previous year’s filing data included tax returns claiming these credits. The value of these tax breaks can be substantial, even resulting in five-figure refunds, in some cases.
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Typically, you can expect a refund when you overpay taxes throughout the year via paycheck withholdings or quarterly estimated payments. By comparison, there’s generally a tax bill when you haven’t paid enough.
Filing season numbers will ‘even out’
Although the average refund is currently smaller, “historically, filing season numbers even out as more tax returns come in,” according to the agency.
As of Feb. 14, the IRS received roughly 33 million individual tax returns of the more than 140 million it expects before the April 15 deadline.
As of Dec. 27, 2024, the average tax refund for the 2024 season was $3,138, compared to $3,167 in late December 2023.
‘Don’t call the IRS’ for refund updates
The latest filing statistics come amid mass layoffs for the agency as Elon Musk’s so-called Department of Government Efficiency, or DOGE, continues to cull the federal workforce.
It’s unclear exactly how the staffing reduction could impact future taxpayer service. But experts recommend double-checking returns for accuracy to avoid extra touch points with the agency.
“Don’t call the IRS looking for your refund,” said Tom O’Saben, an enrolled agent and director of tax content and government relations at the National Association of Tax Professionals.
You can check the status of your refund via the agency’s “Where’s My Refund?” tool or the IRS2Go app, which is “available 24 hours a day,” O’Saben said.
Typically, the agency issues refunds within 21 days of a return’s receipt. But some returns require “additional review,” which can extend the timeline, according to the IRS.
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