Student Loans and Divorce – What Happens to the Debt?

Are you worried about who will be responsible for the debt if you or your spouse owe on student loans and divorce seems inevitable? If so, you need to be aware of how this type of debt would be handled in a divorce.

by Tracy Achen 

5 Factors That Impact the Division of Student Loans in Divorce

How student loan debt is divided in a divorce depends on where you live, when the loans were taken out, each partner's financial situation, and more. Here are some of the main factors affecting the division of student loans.

1. When the student loans were incurred

If the student loan was taken out before you and your spouse were married, it would be considered a separate debt. This means that the person who took out the loan is typically solely responsible for the debt.  

If the loan was taken out or refinanced during the marriage, it would be considered a marital debt to be divided in the divorce. How its divided will depend on whether you live in a community property or equitable distribution state.

2. The laws of the state where the divorce is filed

In the community property states of Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, student loans incurred during the marriage are considered the responsibility of both spouses, regardless of whose name is on the loan. The assumption is that the amount of student loan debt will be divided equally in these states. 

While California is also a community property state, they have laws that specifically address the division of student loan debt, according to attorney Lyle Soloman. 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. You can read more about this is in California Family Code 2641. 

All the other states are equitable distribution states. In equitable distribution states, marital debts are divided fairly rather than equally. Courts will consider factors such as: 

• Each spouse’s income and earning potential. A judge may assign a larger portion of the student loan debt to the spouse with a higher income, especially if the resulting degree led to the higher income. 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. 
  
  
• Whether the loans were used primarily for tuition or living expenses. If the student loans were used for living expenses, the debt may be assigned equally between the spouses. 
  
  
• Financial contributions of each spouse. 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. 
  
  
• Who benefited from the education. For example, if a couple enjoyed a higher standard of living due to the educated spouse’s job, the other spouse may be required to help repay the debt.

3. If There is a valid premarital or postnuptial agreement 

Couples who have a lot of student loan debts can draft an agreement that outlines how the debt will be handled if the marriage ends. Prenuptial and postnuptial agreements can be especially beneficial in community property states because they allow a couple to opt out of the 50/50 debt split.

If you and your spouse had a valid prenuptial agreement before getting married, the provisions in the prenup will override your state’s laws regarding division of student loan debts. If your prenuptial agreement specifies that individual loans are to remain the responsibility of the spouse who incurred the loan, there is a good chance that provision will be upheld during your divorce. Similarly, a postnuptial agreement (made after marriage) can outline how debts, including student loans, will be handled in case of divorce.

It’s important to note that these types of agreements don’t bind the creditors to the agreement. If the loan was taken out in one spouse’s name, it will remain that spouse’s responsibility to repay it. If both spouse’s names are on the loan agreement, they will continue to be jointly responsible for the repaying the loan.

4. If the loan was co-signed by the other spouse

A spouse who cosigns on a student loan for their spouse will remain liable for the loan because divorce does not release a cosigner from their obligations. If the spouse whose education was paid for by the student loan stops making payments, the lender can then pursue the cosigner to recover the unpaid balance.

In some cases, the spouse with the student debt might be able to refinance or consolidate the loans in their name alone. This can remove the other spouse’s liability for the debt if the lender allows it.

5. If student loans were combined through the federal consolidation program

Between 1993 and 2006, married couples could consolidate their federal student loans into one new loan to lower their monthly payment. Unfortunately, couples who had consolidated their loans through this now-defunct program remained jointly responsible for the loan if they divorced.

However, a bill allowing borrowers to separate joint consolidation loans into two separate federal direct loans was signed into law by the president on October 11, 2022. Under the Joint Consolidation Loan Separation Act (JCLSA), borrowers are able to split the consolidated loan based on how much each spouse originally borrowed. You can find out more at Federal Student Aid - Joint Consolidation Loan Separation.

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

If you or your spouse have student loan debt, how it will be divided in your divorce will depend on the factors discussed above. If you’re facing divorce, it’s a good idea to work with a divorce attorney or financial planner who specializes in divorce to help ensure the division of student loan debt is fair.

Related:

Is a Degree Marital Property? 

Divorce and Spousal Debt Liability 

Considerations When Dividing Debts in Divorce