Why Student Loans Will Outlive You: Estate Planning for the Financially Cursed

If you thought your student loans would die with you, I have some bad news: Sallie Mae is more immortal than most vampires. While some people leave behind a legacy of wealth, you're probably going to leave behind debt. So how does that play out when you shuffle off this mortal coil? Let’s dive into what happens to debt when you die and how to handle estate planning when you’re financially cursed.

What Happens to Debt When You Die?

You’d think dying would be the perfect way to finally escape student loans, but unfortunately, life isn’t that kind. When you die, your debt doesn’t just disappear. Instead, your estate becomes responsible for paying off your outstanding loans and credit card bills.

Here’s how it breaks down:

• Federal Student Loans: These are generally forgiven upon your death. Your family can breathe a sigh of relief that at least the government won’t come after them for those loans.

• Private Student Loans: Not so fast. Some private loans aren’t forgiven, and they might go after your estate to recover what you owe.

• Credit Card Debt: Credit card companies will also file claims against your estate to recover their money.

Do Student Loans Go Away When You Die?

As mentioned above, federal student loans are forgiven when you die. But private student loans are trickier—some might offer death discharge, while others don’t. Make sure you check your loan terms to see what applies to you. If you have a co-signer on your loan, they could be stuck with the balance after you’re gone, so it's worth considering how that impacts your estate.

How to Handle Debt in Your Estate Plan

Now that we’ve accepted the grim reality that debt doesn’t die with us, let’s talk about how to manage it in your estate plan. Here are some tips to make sure your estate isn’t drowning in debt after you’re gone:

1. Know Your Debts: Make a list of all your outstanding debts, including student loans, credit card balances, and medical bills.

2. Review Your Loans: Check whether your private loans offer death discharge or if they’ll be passed on to your estate. If they don’t, consider refinancing to a loan that offers this option.

3. Life Insurance: If you’re leaving behind debts, life insurance can help cover those costs so your loved ones aren’t stuck dealing with it. It’s a good way to make sure your debt doesn’t eat up your estate.

4. Update Your Will: Make sure your will includes instructions on how your debts should be handled. This ensures that your estate is managed according to your wishes and that assets are distributed accordingly.

Protecting Your Loved Ones from Your Debt

If you don’t want to saddle your loved ones with your financial mess, consider estate planning as a way to protect them from your debt. Even if you think your estate isn’t worth much, it’s better to have a plan in place than to leave your family dealing with creditors.

And hey, at least you can rest in peace knowing your family won’t be left paying off your overpriced degree or those impulse purchases you made on Amazon at 3 AM.

Plan for the Inevitable

We may never escape our student loans, but at least we can plan for what happens to them when we’re gone. Estate planning isn’t just for the wealthy—it’s for anyone who wants to leave behind something other than debt. So whether you have federal loans, private loans, or just a credit card balance you’d rather forget, make sure you have a plan in place.