Student Loans and Divorce

What happens to student loans in a divorce proceeding? The answer varies depending on the specific facts of each divorce. Generally speaking, any student loan debt incurred before getting married is considered separate debt and any debt incurred during the marriage will be joint debt. However, one must examine the factors surrounding the parties’ situation before the general rule can apply. Regardless if the money was borrowed before or during the marriage, and regardless if the student loan is solely in one spouse’s name, the following factors will determine whether the debt is joint or separate:

  • Who benefitted from the loan? If the monies were used only for tuition and books, it is likely that the only spouse who benefited from the loan would be solely responsible for the debt. A different outcome would result under a different set of facts wherein the loan monies were used for family expenses and benefitted both spouses. In the latter case, the debt would likely be considered a joint marital debt and be divided between the two spouses.
  • Was an Educational Degree earned during the marriage? If the loan borrower earned a degree during the marriage, the degree is a marital asset. Thus, it can be argued that the debt incurred to procure the marital asset is a marital/joint debt. A claim for “reimbursement alimony” might be appropriate under certain circumstances.
  • Did the other spouse co-sign for the student loan? Did the lender take the other spouse’s credit into consideration when granting the student loan? These factors could arguably create a joint responsibility for that debt.
  • Who made payments on the loan? If the student loan was solely paid for by the debtor spouse, it is likely that he/she would bear sole responsibility for that debt.
  • Was the student loan consolidated into a single joint account? This fact would probably cause the student loan to be considered a joint debt.

If it is decided that the debt is a joint debt, another issue arises: How much of the debt will each spouse be responsible for? New Jersey law attempts to “equitably” distribute debt in a divorce. “Equitably” does not necessarily equate to “equally.” The specific facts of each case must be examined with the goal of reaching a fair and equitable outcome. In attempting to reach an “equitable” distribution of student loan debt, the following is a key factor to be considered:

  • What is the earning power of each spouse? If one spouse has far less income and earning potential, fairness would likely require that spouse to incur a far smaller percentage of the debt.

Dealing with student loans and divorce is a complicated matter and requires a skilled matrimonial lawyer to advocate your position. The matrimonial lawyers at Edens Law Group possess the knowledge and expertise to protect your rights. Call (908) 879-9499 to schedule a free consultation today.