Student loans: unfortunately in this day and age, most of us have them regardless of our age. You may be wondering what happens when you go through a divorce, particularly whether your student loan debts remain your spouse’s responsibility or whether you will have to foot the bill.
With respect to marital versus non-marital property, many people wrongfully believe that once you are married, your pre-marital student loans automatically become marital debt. But that is not necessarily the case. In general, student loan debts incurred before the marriage are classified as the separate property of the debtor spouse and continue to be classified as such after divorce. The non-debtor spouse is generally not on the hook, unless otherwise specified in a prenuptial agreement.
But what about student loan debts incurred during the course of the marriage? Many courts have held that such student loans are to be divided equally between the spouses post-divorce. The justification is that the student loan creates an increased income potential, and therefore, the ex-spouse may benefit in the form of higher child support and alimony payments.
With respect to consolidation of federal student loans, Congress declared that, effective 2006, married couples could no longer jointly consolidate their federal student loans. This is a problem that is largely overlooked. Although, on the whole, not many people are affected, the situation can seem utterly hopeless for individuals who are bound to their former spouse’s debt long after their marriages have ended.
According to the U.S. Department of Education, federal law prohibits the division of old loans, regardless of whether domestic violence is involved. Additionally, joint borrowers are not allowed to apply for income-based repayment plans without providing the requisite financial information from both parties. As one can imagine, this can be very difficult for divorced couples.
Federal legislative action has already been proposed, and petitions on ‘change.org’ have surfaced requesting Congress to address the issue. The Department of Education has advised that although the law does not allow joint consolidation loans to be split (even when domestic violence is involved), borrowers dealing with unique circumstances are encouraged to contact the Federal Student Aid Ombudsman in order to find other options.
Please contact the Domestic Team at Cantafio & Song PLLC for all of your Family Law needs.