Student Loans and Divorce – What happens to the debt?

Student loans and divorce can be a complicated issue. The division of student loan debt during a divorce varies depending on where you live, when you took out the student loans, and each partner's financial situation. Continue reading to learn what factors impact student loan liability and what to do if your student loan payments become too much to handle. 

How is Student Loan Debt Handled during Divorce?

By Lyle Solomon, Attorney | November 18, 2022

Your and your spouse's student loans are considered personal debt and must be paid back after the divorce. If you obtained student loans during your marriage and can't agree who will be responsible for the debt, state law would then decide how the debt is divided.

Most states use the equitable distribution principle, in which the court divides marital assets and debt after considering the length of your marriage, the income of each partner, and financial status. The spouse who is not on the loan may still be liable for paying it off if both partners profited from the loans and the education received through borrowing. 

However, the court's determination of a fair division may only sometimes be a clear-cut 50/50 split. It depends on your unique situation and how the rest of the marital estate is divided.

The scenario is slightly different in community property states

Courts determine what constitutes communal debt in the community property states of Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Student loans taken out during a marriage are generally considered a communal debt. This debt is then divided equally.

Even though California is also a community property state, they have laws that specifically address the division of student loan debt. Generally, student loan debts in California are assigned to the partner who took out the loan, unless both spouses benefited from the education the loans funded (1).

Prenuptial agreements may also address student loans and divorce, as well as how assets will be divided if the marriage ends. If you have a prenuptial agreement which specifies how student loan repayment should be handled, state law may not apply. In this case, the asset distribution would adhere to the contract you signed before getting married.

Finally, if joint funds were used to repay one spouse’s student debt throughout the marriage, the other spouse might get reimbursed for half of the funds used to pay down the debt.

Student loans and divorce - yours, mine, or ours?

Each spouse’s responsibility for student loan debt depends on a number of factors, including:

When the loan was obtained

Loans obtained before marriage are regarded as personal debt and must be repaid by the borrower.

Loans obtained after marriage may be regarded as marital debt, which may be the joint obligation of both spouses. Debt may be divided equally in some states where community property is the law. The majority of states, however, follow the equitable distribution model, which divides debt in a way that considers each person's income and how much they each gained from their education.

If the loan was cosigned by a spouse

Even after marriage, a spouse who cosigns on a loan for their partner is still financially liable for the loan because divorce does not release a cosigner from their obligations. The cosigner's credit may still be impacted by future late loan payments. If the borrower stops making payments, the lender may pursue the cosigner to recover the unpaid amount.

If student loans were combined through the federal consolidation program

Prior to 2022, there was no option to divide federal loans that were combined through a now-defunct federal consolidation program that permitted couples to consolidate their student loans. After your divorce, the aggregated loan payments were still a joint responsibility. 

However, a bill allowing borrowers to separate joint consolidation loans into two separate federal direct loans was approved by the Senate and House and signed into law by the president on October 11, 2022.

If the student loans were refinanced during the marriage

If a refinanced student loan is deemed a communal debt in a state where community property is the law, it may be divided equally between spouses. However, the debt division may be based on your financial situation in an equitable distribution state.

Important questions to answer regarding student loans and divorce

  • What function did your spouse perform in your higher education? 

If your spouse supported your studies by taking care of the house or driving you to college, many courts might assume that they have already made their payments and are not liable for any of your student loan debt. 

  • Do you and your spouse each earn the same amount of money? 

The amount of money you and your spouse each make is another factor to consider. The courts are less inclined to hold a spouse accountable for a portion of the debt if they are a very low-income earner. This is especially true if your partner gave up their career to help support your pursuit of higher education. 

  • Have you earned a degree? 

A degree obtained during a marriage may be regarded as marital property in some states. Any debt you accrued while getting your degree could be considered marital debt and will be your joint obligation if this is the case.

How to pay off student loan debt after divorce

If you’re struggling to make the student loan payments after your divorce, here are a few debt relief options to consider. 

Refinance Your Student Loan

Although private student loans are not eligible for the same payment plans as federal loans, refinancing personal loans can be an option to minimize your payments. You can opt for affordable payment plans by selecting a longer loan term or being approved for a lower interest rate. Applying with a cosigner may help you get approved for student loan refinancing with a favorable interest rate if you have poor income or less-than-perfect credit. 

Opt for forbearance

Private student loans and federal loans may be eligible for forbearance if you're going through financial difficulty. Student loan forbearance is a federal program allowing you to temporarily pause making payments. You can find out about your choices for payment relief and how to apply by speaking with your loan servicer. 

You’ll need to continue to make your loan payments while you’re waiting for approval of your request for forbearance. Additionally, bear in mind that interest may accrue while payments are paused, so making at least interest-only loan payments can prevent your debt from increasing during this time.

What if you have already paid off student loans?

What should you do if you recently repaid your ex’s student loans before you got divorced? You may be able to compel them into making restitution. Ask your family law attorney to determine whether you have a compensation case.

On the other hand, you may have repaid your spouse’s student loans years ago. It can be challenging to argue that you should be compensated for paying off your spouse's college debt, especially if they were caring for the family home and children. Ask your lawyer to review the details of your case and determine the likelihood that you will receive at least a portion of the money you paid back. 

Lyle Solomon has been a member of the California State Bar Association since 2003 and been associated with various law firms since 1991. He is the principal attorney of Oak View Law Group and focuses on consumer finance law to help clients handle their debt problems and protect their finances. You can find out more about Lyle on Linkedin or tweet him at @lyle_solomon