Death and Bankruptcy Discharge of Student Loans: What the Rules Allow

What Happens to Federal Loans When a Borrower Dies

Federal student loans, including Direct Loans and Parent PLUS Loans, are eligible for a full discharge when the borrower dies. A family member, executor, or another person handling the estate submits proof of death, usually an original or certified copy of the death certificate, to the loan servicer, according to federal loan servicer guidance on death discharge . A Parent PLUS Loan is also discharged if the student the loan was borrowed for dies, not only if the parent borrower does. The family is not responsible for repaying the canceled balance once the discharge processes.

Private Loans Are Different

Private student loans do not carry the same automatic protection. Whether a private loan discharges on death depends on the individual lender's policy and the terms in the promissory note. Loans with a cosigner, common for private student loans, can leave the cosigner responsible for the remaining balance unless the lender's contract includes a specific cosigner release or death discharge clause. Check the terms of any private loan directly with the lender, since the rules vary widely across the private lending market. Ask any private lender directly, before signing, whether the loan contract includes an automatic death and disability discharge clause. Some private lenders added this protection in recent years, but it is not required by law the way it is for federal loans, so the promissory note is the only reliable place to confirm it.

Steps to Request a Death Discharge

Locate the servicer for each federal loan through the borrower's studentaid.gov account or the National Student Loan Data System. Submit the death certificate, or one of the accepted alternative documents such as a county clerk verification, directly to that servicer, by mail, fax, or an online upload through the servicer's portal. The servicer processes the discharge once it verifies the documentation, and any payments made after the date of death are generally refunded to the estate.

Bankruptcy Discharge Is Not Automatic

Filing for bankruptcy does not erase student loan debt by itself. A borrower has to file a separate action inside the bankruptcy case, called an adversary proceeding, and prove that repaying the loan would create an undue hardship. Many courts apply a three-part test: the borrower currently cannot afford to repay the loan and maintain a minimal standard of living, that inability is likely to continue, and the borrower has made a good faith effort to repay the loan before filing. Only federal loans held by the Department of Education, including Direct Loans and any FFEL or Perkins loans the government holds, go through this federal process, while privately held loans follow separate rules depending on the holder.

The Updated Process Since 2022

The Department of Justice updated its guidance for handling these cases on November 17, 2022, instructing government attorneys to agree to a discharge recommendation when a borrower's financial documentation clearly meets the three-part standard, according to the Department of Justice's announcement . Borrowers pursuing discharge now complete a detailed Attestation Form covering income, expenses, and repayment history, which the Department of Justice reviews to decide whether to recommend discharge to the court. The form was last updated in May 2025. This process narrowed the gap between the legal standard and what borrowers could realistically prove, and more federal loan discharges through bankruptcy have gone through since the change.

Steps to Pursue Bankruptcy Discharge

A borrower first has to file for bankruptcy itself, Chapter 7 or Chapter 13, before pursuing loan discharge. Inside that case, the borrower or their attorney files the separate adversary proceeding specifically asking the court to rule the student loan debt an undue hardship. The Department of Justice, representing the loan holder, reviews the borrower's Attestation Form and supporting financial documentation, then decides whether to recommend a full discharge, a partial discharge, or continued repayment on adjusted terms to the presiding judge.

If the Government Does Not Agree

A borrower whose case does not meet the standard laid out in the Department of Justice's guidance can still ask the bankruptcy judge to rule in their favor. The judge, not the Department of Justice, makes the final call on whether the three-part undue hardship test is met, so a disagreement with the government's attorneys does not end the case automatically. Borrowers pursuing this route generally benefit from an attorney experienced in student loan bankruptcy cases, the standard, and how courts apply it, varies from one federal circuit to the next.

Tax Treatment of Discharged Debt

Student loan debt discharged because of a borrower's death is not treated as taxable income for federal tax purposes for discharges occurring on or after January 1, 2018. Debt discharged through a bankruptcy undue hardship ruling generally follows the same federal exclusion. State tax treatment can differ, check with a tax professional or your state revenue department before assuming a discharge is tax-free at the state level too.

Where to Get Help

The National Consumer Law Center and student loan legal clinics at many law schools offer free or low-cost guidance on bankruptcy discharge cases. A borrower considering this route benefits from a consultation before filing, the adversary proceeding and the Attestation Form both require detailed financial documentation prepared correctly the first time.