What’s mine is not necessarily yours: Divorce and student loans

The unfortunate reality for many college graduates today is that when they walk across the stage to receive their handshake and diploma, they are not just receiving a lifetime of opportunities but also a mountain of debt.

Statistics from the Institute for College Access and Success show that college graduates in 2012 who took on debt to finance their education carried an average of $29,400 in student loans. The figures were even grimmer for those enrolled in graduate programs.

Fortunately, help managing student loans can come in the form of marriage, as both spouses may be earning salaries and, in turn, greatly expanding the pool of available resources to pay down the debt. Indeed, this holds true even if both spouses enter the marriage with otherwise sizeable educational debt.

What happens if spouses in these situations decide to pursue a divorce?

According to legal experts, many people enter a marriage with the mistaken belief that the student loans they incurred prior to walking down the aisle are transformed from individual debt to shared debt, meaning both spouses are legally responsible for it in the event of a divorce.

The simple reality, however, is that any educational debt incurred by a spouse prior to their marriage is considered separate property in the eyes of the law and will remain classified as such in the event of a divorce.

“My law-school-loan debt is forever mine,” said one currently single divorce attorney. “No spouse will ever be liable [for it].”

The situation becomes considerably more complex in the event student loans are taken out during the course of the marriage. Depending upon the state, the applicable property division rules may call for a 50-50 split of the debt regardless of the couple’s respective financial situations or for a more equitable division.

Given this reality, some experts recommend that a couple considering the execution of a prenuptial agreement discuss including a provision outlining how any student loan debt incurred during the marriage will be divided. At a minimum, they advise all soon-to-be spouses to discuss the issue and the amount of student loan debt they are bringing into the marriage.

Have you gone through a divorce where student loans were an issue? If so, what was your experience?

Source: The Wall Street Journal, “Who Is responsible for the student loans after divorce?” Charlie Wells, April 13, 2014