Dividing Student Loan Debt in a Divorce
In the process of a divorce, not only will assets be divided by the spouses, but so will debts and liabilities. Outside of maybe a mortgage, one of the largest liabilities that a divorcing couple can face is a student loan (which is sometimes even larger than the mortgage).
Division is Not Always 50-50
As a general rule, debts are equitably divided just as property is divided. Although both are often divided 50-50, there is no rule that says that they have to be. As the name “equitable” implies, a court’s obligation is to try to divide assets and liabilities fairly, which means that one spouse can be awarded more than 50% of any asset or liability.
In many cases, when debt is taken out during the course of the marriage, there is the presumption that both parties will be responsible for half of the debt. This is presumed to be fair. If the couple took out $5,000 on a marital credit card, and used the $5,000 for expenses related to the marriage, then they should both be equally responsible for paying that debt back.
Student Loans Are Equitably Divided
Student loans are somewhat different because if taken out while the couple is married, the “benefit” of the debt—that is, the thing that was “purchased” with the student loan—is the education or the degree. While that degree may have helped both parties while they were married, upon divorce, one spouse will have that degree while the other will not.
This can make it inequitable to make both spouses equally responsible for student loan debt in some cases.
However, in some cases, the money from student loans is not used just to pay the tuition that lead to the degree. Sometimes, couples use student loans to pay the expenses of the family, while one spouse gets his or her degree. The student loan money may be applied to making mortgage or car payments, or to buying food or paying utilities. In this circumstance, both couples may have received the benefit of the student loan funds, even though only one spouse has earned a degree.
Alimony can also be used to equalize the playing field. The party that obtained the degree may now be making more, or have the ability to earn more money.
Thus, even though a spouse may have to pay part of a debt for a degree that belongs to the other spouse, the non-degree earning spouse may realize an alimony award that he or she may not have otherwise been able to receive.
All of this applies when loans were taken out during the marriage. For loans that a party took out before marriage, and thus brought into the marriage, a court is more likely to find those to be non-marital debts. A student loan taken out and used by one party before marriage does not transform into marital debt after marriage.
Our Tampa family attorneys at the Pawlowski//Mastrilli Law Group can help you understand your obligations after a divorce. Call us with any questions you may have about property division or custody.