What Happens to Student Loan Debt in Divorce?

Outstanding student loan debt now stands at a record $1.5 trillion in the United States, and it has been cited as a contributing factor in up to one-third of divorce cases in recent years. In one recent study, up to 13% of divorced couples specifically cited student loan debt as the main reason for their divorce. What happens to student loan debt in a divorce and who ends up footing the bill? The answer is that it depends, so it is important to understand the rules and regulations regarding student debt and divorce.

Marital Versus Non-Marital Debt

The first factor to consider when determining what happens to student debt in divorce is to see when the debt was incurred. If the student loans were taken out prior to the marriage, the debt is considered the separate property for the spouse that incurred it. However, if both spouses had student loan debt and combined them into a single payment or refinanced the loans during the marriage, it could convert the debt from non-marital to marital property.

Another factor to consider is whether a prenuptial agreement was signed prior to the marriage. Many prenuptial agreements nowadays factor in student loan debt and specifically determine who will be responsible for the repayment of the debt if there is a divorce. This can circumvent any arguments during divorce proceedings by addressing the situation before it becomes an issue.

Other Considerations

If the spouses can not agree on who will be responsible for the student loan debt or how to split the payment, the court typically looks at a few specific considerations. First, what was the money used for? If all of the debt went to paying tuition for the degree, then the court is more likely to assign the debt to the spouse who was working toward the degree. However, if a portion of that money went to covering living expenses and other costs for the family, the court is more likely to split the debt between spouses.

The second consideration is the earning power of each spouse. If one spouse has little to no income, especially if that person set aside a career to take care of the household while the other spouse received a degree, the court is less likely to assign that person student loan debt. However, if both spouses have relatively equal earning power, the chances are more likely that the court will split the debt.

The last consideration is whether the spouse attending school actually received a degree. A professional degree is considered property in most divorce cases, so if it was earned during the marriage, it is considered marital property. This also means that any debt incurred to receive the degree could also be considered marital debt and split accordingly. This is determined by the state where the divorce is taking place and the division of asset rules that apply there.

Get Answers to Your California Family Law Questions

At Kearney | Baker in Pasadena, we represent spouses through all aspects of the dissolution/divorce process. Our partners, Brian A. Baker and Gary W. Kearney, are both Family Law Specialists, as certified by the California State Bar. To schedule a consultation regarding any questions about the family law in California, contact one of the family law attorneys at Kearney | Baker today at 626-768-2945.