Student Loans And Divorce
There are currently more than 43 million student borrowers in the United States that are in debt to the tune of a total of $1.73 trillion dollars, according to the Education Data Initiative. This means that on average, students owe just over $39,000 each. This can be a staggering amount of debt for couples, especially if both spouses have student loans. If one spouse incurred student loan debt is the other spouse responsible for repaying the loan in the event of a divorce? There are many questions regarding student loans and divorce that couples may have. Those who are facing this issue may want to consider reaching out to Simpson Legal Group, LLC at 712-256-9899.
Student Loan Debt – Before and After Marriage
Who is responsible for paying off student loan debt in a divorce depends largely on whether the debt was incurred prior to or during the marriage. In the divorce process property, assets, and debt are divided in different ways depending on whether the state is a community property state, or an equitable distribution state. Iowa is an equitable distribution state according to The Iowa State Bar Association, which means marital assets and debts are divided in a way that is deemed equitable or “fair,” and not necessarily exactly equal.
Student Loan Debt Prior to Marriage
When one spouse acquires a student loan prior to marriage, the debt generally remains the responsibility of that spouse following divorce. For instance, if one spouse borrows $40,000 to attend nursing school prior to marriage, that debt is his or hers when the marriage is dissolved. This may not be the case if there is a prenuptial agreement, depending on the terms of the agreement. When both spouses have student loan debts, they each take responsibility for making payments on their own loans. If there is a substantial difference between the student loan debts of one spouse and the other, it may be necessary to seek legal guidance in an effort to balance the assets and debts in divorce.
Student Loan Debt Following Marriage
When one (or both) spouses obtain a student loan after they are married, dividing the debt becomes a bit more complicated. Equitable distribution means dividing both assets and debts in a way that is fair, although not equal. Spouses should agree as to how these assets and debts are divided, which may require legal guidance. There are several factors that may impact how student loan debt acquired during the marriage may be divided. These factors include:
- The length of the marriage
- Which spouse profited from the student loan
- Whether the student loan debt was incurred during the marriage
- How the student loan money was used
- The earning capacity of both spouses
- Whether there is any pre-existing legal agreement such as a prenuptial agreement to consider
- Which spouse’s name is on the debt
- Whether the other spouse co-signed on the student loan
- How other assets and debts will be divided
Simpson Legal Group, LLC is available for those who need further assistance regarding student loans and divorce.
Key Questions to Consider Regarding Student Loans and Divorce
When dividing assets and debt in a divorce, there are some specific questions regarding student loan debt that should be considered. These include:
- How was the student loan money used?
- What is each spouse’s earning capacity?
- Did the spouse who took out the loan earn a degree?
- Is there a prenuptial agreement that is relevant to the student loan debt?
Student loans are typically used to pay for books, tuition, school fees, and other materials essential to education. When a portion of the loan is used for costs that aid the family such as rent, utilities, and other expenses, it may impact how spouses choose to repay the debt. The earning capacity of each spouse also affects how the courts determine the division of student loan debt. If the spouse incurring the debt earned a degree during the marriage, it may be deemed marital property which could result in both spouses being required to pay the student loan debt. Contracts such as prenuptial agreements often outline how student loans and other debts may be settled in the event of a divorce.
Student Loans for Children’s Education
Many couples who divorce share biological or adopted children for whom they take out student loans for the payment of college tuition and other education costs. When both spouses agree to take out a student loan, both will generally share the debt in a divorce. When one spouse incurs the debt on their own without the agreement of the other spouse, in most cases the debt is still regarded as marital. This is also true when one spouse earns considerably less than the other, however the decision on how the student loan debt will be treated remains with the trial court. Like Iowa, Ohio is an equitable distribution state. In Vergitz v. Vergitz, 2007-Ohio-1395, the Ohio Court of Appeals found that both spouses were responsible for the student loan debt, and that it made no difference which spouse took out the loan. The exception to this is when a child belongs to only one spouse in a marriage.
Consider Scheduling a Consultation with Simpson Legal Group, LLC
Divorce is never easy, and there are many factors to take into consideration concerning marital property, assets, and debt. Having a student loan debt, whether for one or both spouses or shared children, only complicates matters further when the marriage comes to an end. Considering the high cost of tuition today it is no surprise that spouses often cannot agree on how to divide the debt when they divorce, especially when one spouse is a high earner and the other is not. Student loans are often much higher than the cost of a very nice automobile depending on the level of education required for a specific type of degree, such as a law degree. Those who have questions or need legal guidance regarding student loans and divorce may want to consider scheduling a consultation with Simpson Legal Group, LLC at 712-256-9899.