A good estate plan should maximize the assets you leave behind for the benefit of the loved ones. Therefore, good estate plans are crafted to protect your assets from creditors. If fewer creditors are able to get at your assets then you will have more assets to pass on in your estate. These days holders of student loan debt are major creditors. There are many different types of creditors that can hold that debt and the debt can take many forms.
Forbes reported back in February 2020 that the total student loan debt is 1.56 trillion dollars. The average amount of debt per borrower in the United States is $32,731. In Minnesota, the average amount of student loan debt per borrower is $32,317. A lot of thought goes into repaying loans or entering into forgiveness programs. Significantly less thought goes into what happens to your loans after you die. What happens will depend on the types of loans you have and clever estate planning.
Fortunately for your beneficiaries, federal student loans are discharged upon the death of the borrower, meaning that the government will not try to collect the remaining balance out of the estate or from your loved ones. You can rest easy knowing that the debts were not passed on. However, for other types of loans this may not the case. Private lenders will be treated as creditors of the estate. As a creditor, the private lender must file a claim within the applicable time period or be barred.
Simply having a will may not protect your assets from student loan lenders. Schedule a consultation with our estate planning attorney. With proper planning, you can protect your assets from creditors and ensure a larger share for the beneficiaries designated in your estate plan