Who gets the student loans in a divorce?

Michael Lux Blog, Student Loans 0 Comments

This is one area of student loans where there seems to be a lot of bad information floating around.  This article will discuss a few of the general rules that apply, but its important to note that these are only general rules.

Divorce law is an area of law that varies state to state.  Because each state has its own divorce laws, it is possible that your state may be an exception.  Therefore, the following article should be used as nothing more than a general guide to point out specific issues that may apply to your individual situation.

When it comes to student loans and divorce, two details are especially important: when the loan was acquired and the terms of the loan contract.

Loans from before your marriage

Legal experts say that “one of the most common misconceptions about dividing debt in a divorce is the belief that educational debt incurred before a marriage always becomes shared, marital debt once a couple gets hitched.”  In reality, a divorce means the debt stays with the person who brought them into the marriage.  This can be a rude awakening for people who have become accustomed to getting help with their student loans.

Loans taken out during the marriage

This is where things get really tricky.  It is possible that the student loans will be considered marital debt, and thus split in the event of a divorce.  It is also possible that the court will determine that one party benefited more from the loans.  In that case, the court will give more of the debt to the party that benefited more.

As noted earlier, divorce law is highly state specific, this is one instance that will vary greatly from state to state.

The terms of the loan contract

This is where the rubber meets the road on most student loan issues.  If you cosigned on a loan for your spouse, that means you accept responsibility in the event that your ex fails to pay.  Divorce or no divorce, signing a student loan or consolidation is a contract.  A change in marital status does not alter the contract.

The bottom line

Admittedly, not much of the information here is specific.  That is very much on purpose.  The most important thing to be aware of the potential issues and investigate how they apply in your individual state.