Loan experts.
If a student has grad plus or grad Direct Loans…in the student name only…and gets married…what would happen to these loans if something happens to the student.
Questions are for medical school students who will have a good amount of debt.
Get life insurance…
if necessary. If the sole reason for buying life insurance is to pay off the loan if the responsible party dies, and if the loan would de forgiven anyway in that circumstance, than paying the life insurance premium is a waste of money.
thumper1, I don’t have a good answer for you, but I suspect it may depend on state law (community property or not, etc.) and the written terms of the loan document.
Discharged with proof of death: https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/death .
Interest rate for Grad PLUS is fixed. Each year, the rates are reset based on a formula tied to T-bills; however, the rate for the year remains the rate for that loan. Grad PLUS interest rates are 1% higher than Grad Unsub interest rates.
The simple answer on liability of a spouse is no, they are not responsible It is no different than any other debt that is the responsibility of one spouse.
If the debt-owner spouse is in default, joint assets (tax return, bank account) could be attached for repayment. It is possible to separate those assets, but it is best not to co-mingle them in the first place. Also, if the debt is consolidated after marriage, in some community property states there might be some liability, but again this could probably be unwound through accounting.
The amount of any grad direct or grad plus loans forgiven/discharged due to the death of loan holder is considered taxable income for the student’s estate. State and federal income taxes must be paid so it’s prudent to have a term life insurance policy equivalent to the 33-50% of the amount of the loans.