Are Student Loans Considered Marital Debt?

There was a time when marital debt and student loans may not have been considered in the same context. After all, by the time people might consider divorce, they would likely not harbor student loan debt any longer. That isn’t the case today, though, as nearly 45 million Americans have active student loan debt – and that debt tends to linger for decades after they complete their education. In fact, there are millions of Americans in their 40s, 50s, and 60s now struggling with student loan debt and those numbers are only likely to increase as millennials and younger generations continue to age.  

Divorce is always a difficult scenario, but substantial debt can make it even more so. Figuring out who owes what and how to divide assets as well as debt can make an already uncomfortable situation even more stressful, especially without good legal counsel to help you navigate the process. While there are no easy or straightforward answers regarding how student loan debt fits into divorce, there are laws that can help you better understand what to expect.  

Are Student Loans Considered Marital Debt?

In general, debt that is accrued during a marriage is considered a shared liability between the two partners. Generally, you will divide both your assets and your debts between the two of you, but that can get tricky when it comes to things like student loans.  

So, are student loans considered marital debt? The simple answer is yes, but there is a lot that can complicate that answer – and understanding all of it will help you determine your individual responsibility for repayment.  

Start with Your State’s Laws

The division of assets and responsibility for debt after divorce is something that is determined by your state’s laws. Barring any extenuating circumstances, there are fairly straightforward rules that determine how your communal property, assets, and debts will be split.  

In community property states, both members of the dissolving marriage have equal ownership of all assets – and debts – owned by the married pair. This applies to all assets and debts incurred during the course of the marriage, as well as any brought into the marriage that aren’t otherwise specified in a prenuptial agreement.  

In equitable property states, the division of assets won’t necessarily be 50-50. The same can be said of debts. A case can be made during the divorce proceedings by either spouse that they should own less of the debt or more of the assets, although proof will be necessary.  

These days, most states are equitable property states. This is widely considered the fairest way to address the financial aspect of a divorce, since every couple comes into the process with different circumstances. In general, debts are divided similarly to assets, though there are plenty of details that may make it more difficult to divide and fairly assign.  

Understand the Difference Between Debt Incurred Before and During Marriage

Legally, any student loan debt incurred before a marriage belongs exclusively to the spouse who incurred it. However, it may still be determined to be part of the divorce settlement if one spouse is much more financially stable than the other.  

Likewise, any student loan debt incurred during marriage can be considered – and in some states is – joint “property”. This will mean that both spouses are responsible for its repayment, though again, this can be complicated by a variety of factors.  

Is Paying Off Debt Before the Divorce the Best Option?

Some people may consider simply paying off their remaining student loan debt before proceeding with divorce. If this is a possibility for you, it can make the dissolution of your marriage much simpler. However, for many, it simply isn’t logical or even possible. Instead, consider working with a seasoned attorney to determine who is responsible for the debt to ensure you don’t get saddled with unnecessary financial responsibility.  

Breaking Down the Debt – Important Questions to Ask

As you’ve already seen, there is so quick and easy answer to the question “are student loans considered marital debt?” However, there are some questions to help you better determine who might be primarily responsible for repaying that debt.  

First, how was the money that incurred the debt used? For the most part, student debt will have gone toward tuition costs, books, and other materials associated with education. But in some, it may have also gone toward living expenses, housing, and more. In this case, it may be deemed that the funds benefitted the other spouse in such a way that they would be equally responsible for repayment.  

Second, who was the primary breadwinner in the marriage, or was that task divided between both partners? A spouse’s earning power has a lot to do with their responsibility to repay marital debt. Why? Because a person with high earning power is more likely to be able to care for themselves and any children the pair may have while also making payments toward this debt. A spouse who is leaving the marriage with no employment or prospects – or with very low earning power – will struggle with these financial responsibilities and are less likely to be deemed responsible for repayment of these debts by a divorce court.  

Lastly, did the spouse(s) who incurred the debt obtain their degree during the marriage? This is more important than you might think, since in some states, a degree earned during a marriage is actually considered marital property. This is because a higher-level degree unlocks higher lifetime earning potential. Since it is then considered a shared financial asset, the debt incurred to obtain it then becomes shared between the spouses.  

Keep in mind, this is only true in some states, such as New York. As with most things regarding divorce, understanding your state’s laws is key. For more help with this, contact the knowledgeable staff at the Van Horn Law Group. Their experience can assist you with navigating the confusing and difficult process of divorce – whether you owe student loan debt, or not.