Does Divorce Affect Your Student Loans?

By Ashley Eneriz on 8 November 2016 0 comments

Going through a divorce can get messy, especially when there are a lot of assets to divide and financial matters to take care of. Even worse, couples often forget that debts — and not just assets — must often be split. And student loan debt can be especially hairy. Understanding the ramifications of divorce on student debt is essential to negotiating a mutually beneficial split. (See also: Here's What Happens to a Mortgage in a Divorce)

When Did You Take on the Debt?

If you took on your student loan before marriage, then the debt is considered separate property, and you are solely responsible for it. Similarly, you won't be held responsible for any debt taken out by your spouse before marriage.

However, if you or your spouse took on student loan debt while married, then the debt is considered your shared property. As a matter of fact, any debt taken on in a marriage is considered shared property, including the following:

  • Mortgages
  • Car loans
  • Personal loans
  • Sometimes business loans
  • Credit card debt

It All Depends on Your State's Laws

Many states are community property states, which means everything is split down the middle. If you live in a community property state, the student loan debt (along with all other debt) will be split 50-50. Even if one party will suffer financial hardships from the split debt, the court will still hold them liable for half of it.

Of course, it is the court's discretion how they split marital property, and each state has unique rules in place. In equitable distribution states, such as New York, each divorce is weighed differently. According to The Wall Street Journal, "If it seems like one spouse will have high income after a divorce and another will struggle to make debt payments, the higher earner may end up having to fork over some temporary spousal support to cover the ex's debt payments."

Consolidated Student Loans

Before 2006, married couples were able to consolidate their loans. Many couples did this to get a lower interest rate and save money — but for couples that did this, they had to permanently attach themselves to the loan.

Unfortunately, if one party does not pay their assigned portion of their loan, the other party will still be held fully responsible. Married couples can no longer consolidate their student loans, so if you were married after 2006, then this does not apply to you.

How to Avoid Problems Before Marriage

No couple wants to think about divorce before they get married, but if student loan debt is worrisome to you, there are a few things you can do before tying the knot. First, it is important that both you and your potential spouse know how much debt you each have. Everything should be laid out on the table. Secondly, to protect yourself, sign a prenuptial agreement that states how debt is supposed to be split in the case of a divorce. (See also: Could a Divorce Improve Your Finances?)

So How Much Student Loan Debt Will I Be Responsible for After Divorce?

When it comes to figuring out how much student loan debt you will be responsible for after a divorce, it all depends on your case and the state you live in. It is important for you and your spouse to know the financial weight of your divorce before committing to one fully. Talk with a divorce attorney to find out more information that relates to your specific case.

If the court does hold you responsible for your spouse's student loan debt after divorce, then it is important to pay it. If you don't, you will be held liable, your wages could be garnished, and your credit score can suffer.

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