Student Debt and Divorce

Divorce is one of the financial watershed moments in the lives of most people.  Their lives can be forever measured by what came before and what came Debtafter the divorce.  People today are carrying a record amount of debt, and paying for these debts can become especially difficult after divorce when there are no longer two people to pool resources and help pay a debt together while helping with the other necessary expenses.  Student loan debt is exceedingly common, and can be a significant source of debt and financial stress for a couple.  In a divorce, there are several issues that may impact how student loan debt will be divided.

In general, any debt that is acquired before the marriage is considered a non-marital debt and is not subject to division in the divorce.  Similarly, any debt acquired after the marriage is marital debt and is subject to division.  Even if a debt acquired after the marriage is only taken out in one sole person’s name, it can still be a marital debt.  In other words, the provisions of the contract between the loan agency and the spouse who takes out the debt will not limit the court’s ability to divide the debt between the parties.

According to these rules, any student loan debt taken out before the marriage will generally belong solely to the spouse who took out that loan.  However, consolidation of student loans is very common.  If, for example, you and your spouse consolidated your student loans after the marriage in order to obtain better payment rates, it is possible that the debt may now be a marital debt.  This is especially true if your consolidation included more than just one spouse’s loans.

It is important to note that while a student loan debt taken out during the marriage may be marital debt, that does not necessarily mean that each party will end up being responsible for paying exactly half of that debt.  A Minnesota divorce court will make an equitable division of debt.  Equitable does not always mean equal.  A divorce judge may determine, for example, that even though one spouse took out student loans to become a doctor during the marriage, the entire student loan debt may be nevertheless assigned to the spouse who became the doctor, especially if he or she has the better ability to pay those debts and also because he or she will be the one deriving the benefit of the debt. On the other hand, if some of the student debt was used for living expenses during the marriage, that portion may be divided between the parties.

If you are getting a divorce, it is important that you understand how debt division works.  Call us today for an appointment.