Morbid question - if a married parent is the sole borrower on a ParentPlus loan, and passes away during the term, it appears that the loan is discharged without affecting the student or the spouse/estate. Is that the same for NJClass HESSA loans as well? Or is that incorrect for both loans?
It is correct for Parent PLUS loans, but I don’t know about the NJ loan. By the way, the loan is also discharged if the student dies (I had that happen several times while working in financial aid, unfortunately).
I believe if the student is the primary on nj Hess’s, they are required to pay the loan if the co-signer passes.
Forgiving a loan upon death is not the normal lending policy. Usually the bank/lender would have a claim against the estate, or in the case of a parent borrowing and the student dying, the loan would just continue on. No different than if a homeowner with a mortgage died and the bank’s lien on the house would still be valid (if no separate POD mortgage insurance). It is discharged if the borrower or the student dies only because Parent Plus loans specifically provides for this. I don’t know if the loan is discharged if the non-borrowing parent dies (but I think not).
You’d have to check the specifics of the loan/lender. I do know that NJ loan program did NOT provide for forgiveness if the student died as there were a few highly publicized cases in the early 2010s where the parents were still liable for thousands in loans for their deceased children. May have changed now because of the uproar.
I believe NJClass require the co-signers to pay in the case of death or permanent disability to the student. We use Sallie Mae, the loan is forgiven. That’s not the only reason we chose them as a lender, if they didn’t we probably would’ve purchased life insurance policies.
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