According to a report from June 2019, 43 million adult Americans currently carry student debt from loans used to pursue higher education. Federal student loan debts total $1.5 trillion. Additionally, roughly $119 billion of debt exist through private loans.
Clearly, there is a student debt crisis in this country. Which means that divorcing couples are often forced to consider student loan debt in their settlement.
Will one spouse keep all of it? Will it be split 50/50 between spouses? Do you have to pay for your partner’s debt when you didn’t get any benefit from it?
In this first post of a two-part series, we hope to answer these questions and give you an idea about what will happen to this debt during a divorce.
Who’s Is it Anyway?
In the most basic sense, it comes down to who’s debt it is and when the debt was incurred. If the debt was incurred before the marriage, most likely it will be considered separate property and will remain the sole responsibility of the spouse who took out the loan.
However, if the debt was incurred during the marriage, things can get more complicated.
First, the way it’s divided will depend on whether you live in a community or equitable distribution state. Each state has different rules about whether marital property is split 50/50 or whether it is split equitably (i.e. fairly) but not necessarily equally. Most states are equitable distribution states and will split debt based on a variety of factors.
It is a good first step to find out which type of state you live in so you have an idea of how the distribution of your debt will be approached by the court.
Important Questions to Consider
There are several questions that will help the court, and you and your spouse, understand how and why your debt is being split the way it is. Some of these questions include:
How was the money used? If the loan was used only for educational purposes, i.e. tuition, books, materials, then it is likely that the debt will remain that spouse’s responsibility. However, if you lived together and the loan was also used to offset shared living expenses, it’s possible the debt will be split between both parties.
What role did your spouse play in your education? Were they home taking care of the house while you attended classes? Did they provide your transportation to and from campus? If they did, they may be considered to have already paid dues by supporting your education. This is taken into consideration on a case by case basis.
Do both spouses have the same earning power? If you make considerably more money than your spouse or your spouse left a job in order to support you in your education, it isn’t likely they will be held liable for paying part of the debt.
Was a degree received during the marriage? Degrees that are earned during a marriage are often considered marital property because they increase earning potential. In this case, your spouse may be liable for paying part of the debt because it would be considered marital debt.
Was your spouse a co-signer on the loan? Co-signing a loan makes the co-signer just as legally responsible for the loan debt, even after a divorce. Therefore, it is likely you and your spouse will both be required to pay for part of the debt.
Who Do I go to for Advice?
It would be a good idea to talk to a lawyer about your concerns, as well as a financial professional. They can give you the advice necessary to understand how your student loan debt will be handled.
Divorce is complicated and student loan debt makes it even more so. But knowing the facts and being prepared financially can spare you some some headaches.