If a student who has a Stafford loan dies while enrolled, is the school required to perform the Return of Title IV Funds calculation and return any unearned funds to the lender?
Yes. The school must return unearned Title IV funds, including FFELP loan funds, to the appropriate party. In the case of FFELP funds, the return should be made to the lender of record. While the loan subsequently will be discharged due to the borrower’s death, only the amount that the borrower otherwise would have owed is eligible for discharge. The school should also note that the school is not permitted to deliver Stafford loan funds to the student after the date of the student’s death, meaning that those funds cannot be applied toward items such as balances on the student’s account at the school (see Common Manual subsection 9.5.A).
Related Questions
- Must a school determine a students eligibility for a subsidized Federal Stafford Loan before determining a parent borrowers eligibility for a Federal PLUS Loan?
- Is a return of Federal Stafford (or Direct) Loan funds required if the school learns of an overaward after all loan funds are delivered?
- I am a student currently enrolled in school on at least a half-time basis. Can I consolidate my Stafford loan debt now?
