EP 27: What Happens to Student Loans in Divorce?

Welcome to the twenty-seventh episode of the Divorce and Your Money Podcast. Shawn Leamon, MBA and a Certified Divorce Financial Analyst, discusses student loans and what happens to them during divorce.

Student loans are often the largest form of debt after your mortgage.

If student loans were taken before marriage, they are generally considered separate property. They aren’t necessarily added to your spouse’s debt when you get married and usually stay with the person who took it after divorce.

If the loan is taken during the marriage, matters are more complicated. State rules vary on this subject. In some states, a professional degree is considered separate property, while in other states it is considered marital property. Complications are also involved in how the debt was used. If it was used solely for study-related expenses, it usually stays with the person who took out the debt, but if it was used for any other purposes, such as housing or living expenses for both spouses, then both could be responsible for this debt.

If you get divorced shortly after you or your spouse earns a degree, the debt will likely stay with the spouse who took it. If the debt was incurred a long time in the past and helped both spouses, it will likely be considered marital property. You will also have to consider the earning power of each spouse after the divorce. This is a tricky matter, as a number of factors are often in play. You will have to work closely with your attorney concerning this subject.

Key Learning Points:

  • Student loans, just like other debts, are either marital property or separate property.
  • Student loans taken before marriage are generally considered separate property.
  • If the loan is taken during the marriage, it is marital property.
  • In case of separate property, only the spouse who took the loan is responsible, while both can be responsible in case of marital property.
  • Make sure you consult with your attorney on this sometimes complicated subject.