If you’re going through a divorce and you or your spouse are carrying student loans, you are not alone. As student loan debt becomes an increasing burden for more and more people, many individuals are either bringing this debt into their marriage or taking on student loans during their marriage. In fact, according to the Education Data Initiative, 52% of married undergraduates accept federal student loans. Nearly 50% of federal student loan borrowers are between the ages of 25 to 34. Coincidentally, the average age of couples going through their first divorce is 30 years old.
For divorcing couples, worries about who will pay for student loan debt are increasingly pressing. In this blog we will discuss the way student loans may be allocated in a California divorce.
Are Student Loans Considered Community Property?
During a divorce, it can be challenging to divide what was once a shared life into two separate ones. One of the most difficult aspects of this process is navigating property division. Dividing your marital property encompasses both your assets and your debts.
In California, assets and debts acquired during a couple’s marriage are generally considered community property, meaning that those assets and debts belong equally to both spouses. California Family Code Section 2550 states that the court shall divide “the community estate of the parties equally” unless the parties agree otherwise (i.e. through a prenuptial agreement). However, assets and debts acquired before a couple’s marriage are generally considered separate property and will belong to the spouse who incurred them.
Student loan debt, however, is an exception to this rule. California law treats student loan debt differently than most other kinds of debt.
How Is Student Debt Assigned During a Divorce?
Instead, California law considers student loan debt to benefit, by default, the individual and not the community. California Family Code Section 2641 assigns loans incurred either before or during a marriage for the education or training of one spouse to that spouse. In other words, if you take a student loan out to pay for your education either before or during your marriage, the state of California will consider that debt to belong to you during a divorce proceeding.
California law does, however, provide for a few important exceptions. A court may divide the student loan debt between the two spouses if:
- The “community” – meaning both spouses together – benefited from the education, training, or student loan
- The education, training, or student loan incurred by one spouse is offset by the education or training received by the other spouse for which community contributions have been made
- The education acquired by one spouse through the student loan reduced that spouse’s need for spousal support
How Does the Court Determine if Student Loans Benefited the Community?
The court has discretion when determining whether student loans benefited the community, but there are two “rebuttable presumptions” – or assumptions that the court makes to make this determination. They are:
- If the student loans were incurred less than 10 years before starting divorce proceedings, the court assumes that they community did not benefit from the student’s education, and the loan will be assigned to the student spouse.
- If the student loans were incurred more than 10 years before starting divorce proceedings, the court assumes that the community did benefit from the student’s education, and the loan will be assigned to the community.
Either of these assumptions can be overcome with sufficient evidence to the contrary. For instance, if you incurred student debt less than 10 years before filing for divorce, you may be able to prove that you and your spouse enjoyed a higher standard of living or acquired significant community assets due to your education. This is why it is important that you consult an experienced attorney if there are student loans at issue in your divorce.
It is also possible to seek reimbursem*nt for expenses that were paid to support a spouse’s education, including tuition, books, fees, and supplies, as long as it can be proven that these expenses were made through community funds. In order to seek reimbursem*nt, it must also be proven that the student spouse’s earning capacity increased substantially due to this contribution of community funds toward their education.
How a Lawyer Can Help You Negotiate Student Loan Debt
If you or your spouse has student loan debt that was acquired during your marriage, it is vital that you hire a reputable attorney who can represent your interests during your divorce, helping to ensure that you and your spouse come to a fair agreement. At Palmer Rodak & Associates, we understand that every couple’s situation is different, and we will take the time to listen to you so that we can help create a legal strategy for your divorce that is customized to your unique circ*mstances.
If you are, on the other hand, considering getting married, it may be wise to create a prenuptial agreement that states how your current and potentially future student loan debt will be handled and that also accounts for student loan payments that may be made during your marriage.
Whether you are considering beginning a marriage or ending one, the attorneys at Palmer Rodak & Assocciates are here to help you ensure that your future is protected. If you have questions about how student loan debt will be handled during divorce, contact us today at (760) 573-2223 for a consultation.
FAQs
In a community property state, any marital asset or debt acquired during the marriage is considered jointly owned by both parties. This means that even if only one spouse took out the student loan, the other spouse would still be responsible for paying it off in the event of a divorce.
Who is responsible for student loan debt in divorce? ›
Typically, student loan debt incurred before the marriage is the responsibility of the person who took on the debt, while a student loan taken during the marriage may be the responsibility of both spouses, even after divorce.
Is wife responsible for husband's student loans? ›
California is one of the few states that follow community property laws, which contend that all assets and debts acquired by either spouse during the marriage are considered "community property," subject to equal division upon divorce.
Should I help my husband pay his student loans? ›
If you want to help your partner pay down debt, make sure you have adequate emergency savings first. A solid goal is to save at least three to six months' worth of expenses. You can also encourage your significant other to build their own emergency savings or you can each contribute to a joint account.
Are parents responsible for student loan debt? ›
Generally, parents are not liable for repaying federal student loans taken on by a student. This includes direct subsidized loans, direct unsubsidized loans, direct PLUS loans made to graduate or professional students, direct consolidation loans, and Perkins loans.
Do I inherit my spouse's student loan debt? ›
Couples take on a lot of shared financial responsibility when they marry. This doesn't normally extend to student loan debt — except if the couple combines their respective debts into a joint spousal consolidation loan (or one partner co-signs for another's debt, as mentioned earlier).
Does my spouse's income affect my student loan repayment? ›
If you're married, you and your spouse's income and student loan debt will be considered to determine your payment only if you file your taxes jointly. If you file your taxes separately, only your information is used to determine your payment.
What happens if my wife doesn't pay her student loans? ›
If your spouse defaults on their student loan debt and you're not a cosigner, then you're not legally responsible for repaying the loan. The lender can't collect from you. However, your finances as a household are still in jeopardy.
What happens if you never pay your student loans? ›
If you don't make your student loan payment or you make your payment late, your loan may eventually go into default. If you default on your student loan, that status will be reported to national credit reporting agencies. This reporting may damage your credit rating and future borrowing ability.
Can my wages be garnished for my wife's student loans? ›
Your spouse's wages can't be garnished for your student loan debt. Neither the federal government nor a private lender can garnish your spouse's paycheck to collect defaulted student loans — even if you live in a community property state like Arizona or Texas.
Generally speaking, you're not responsible for your spouse's student loans if they took them out before marrying you. However, you may be responsible for student loans taken out during the marriage, even if you didn't co-sign for them.
Can unpaid student loans put a lien on your house? ›
However, if you default and the U.S. Department of Education cannot garnish your wages, offset your tax refund, or take your Social Security Benefits, it may sue you. If the government gets a judgment against you, then it could put a lien on your assets, including your home.
Does student loan forgiveness apply to spouse? ›
If you and your spouse filed taxes jointly, you'll need to have made less than $250,000 combined to qualify for student loan forgiveness. If your combined income was above that threshold, neither of you will be eligible. Your 2020 and 2021 tax returns will be used as proof of income.
Do student loans go away after 7 years? ›
Do student loans go away after 7 years? While negative information about your student loans may disappear from your credit reports after seven years, the student loans will remain on your credit reports — and in your life — until you pay them off.
Who actually owns student loan debt? ›
Private companies own all private loans. The U.S. Department of Education holds most federal loans. Both the Department of Education and private institutions partner with third parties called student loan servicers.
Do kids inherit student loan debt from parents? ›
If a borrower dies, their federal student loans are discharged after the required proof of death is submitted. The borrower's family is not responsible for repaying the loans. A parent PLUS loan is discharged if the parent dies or if the student on whose behalf a parent obtained the loan dies.
Am I responsible if my husband takes out a loan? ›
Most states use common law (also known as equitable distribution), which dictates that married couples don't automatically share personal property legally. In other words, you aren't responsible for your spouse's debt unless you took it out together as a joint account, or you cosigned on it.
Can my spouse's wages be garnished for my student loans? ›
Your spouse's wages can't be garnished for your student loan debt. Neither the federal government nor a private lender can garnish your spouse's paycheck to collect defaulted student loans — even if you live in a community property state like Arizona or Texas.
Who is responsible for student loan debt? ›
You repay your Direct Loan(s) to the U.S. Department of Education via a Servicer they assign to you. Before you take out a loan, it's important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
Are you responsible for your spouse's debt before marriage? ›
You won't be held responsible for debt your spouse has incurred before your marriage. The only exception to this rule is if you become a joint account holder during the marriage.
