Marriage, Divorce and Student Loans—What You Need to Know
San Diego, CA – About 40 percent of California college students graduated with an average debt of $22,413 in 2016.
Pew Research reported that Americans owed more than $1.3 trillion in student loans at the end of June, which means that student loan debt is as much a part of adulthood as utility bills and taxes for many people these days. It can be a factor worth discussing in marriages and divorces.
Following are some considerations, should you have student loan debt and find yourself planning to tie the knot or return to the single life.
For Richer or Poorer
Your student loan payment requirement could increase if you get married and have an income-driven plan. USA Today reports that filing your taxes as “married filing jointly” means that your spouse’s income will be counted when calculating the monthly payment amount for your repayment plan.
Marriage may make you ineligible for certain income-driven plans because to qualify for some pay-as-you-earn options, the monthly payment must be less than if you were under the Standard Repayment plan, according to USA Today. Chances are, a dual income household will bump you out of eligibility.
Another thing to consider if you live in a community property state such as California is that your spouse’s debt could become your responsibility if you’re married when the student loan is taken out.
Does your spouse have student loan debt and no job? You might be responsible for those loans if they are unpaid.
Avoid a Surprise
Hopefully if you’re getting married, you’re close enough that you feel comfortable discussing how much debt each of you are bringing to the marriage. Ask about student loan debt and discuss the plan for repaying it.
It is possible to put measures in place up front that will prevent you from taking on your spouse’s student loan debt. You could sign a prenuptial agreement that outlines how you two will address student loan debt should you divorce.
Til Debt Do Us Part
Finances can be a major marital stressor, and they certainly can become contentious in divorce proceedings as well. Generally speaking, debt incurred during the marriage such as car loans, mortgages and credit cards will be divided equally in a divorce.
Let’s say you or your spouse returned to school after you were married and now there is student loan debt to be dealt with as you go through the divorce process. On the surface, you might assume the debt is the responsibility of the spouse who got the education. But this isn’t so cut-and-dry. It depends on how you used the borrowed money.
If those loans funded the classes and books required for one spouse get the degree, that spouse likely is responsible for repaying the debt, according to a Forbes article on the topic. If those funds were used to pay rent or a mortgage, or cover other living expenses, a court may consider that marital debt, and make repaying the responsibility of both parties.
Timing also is a factor in determining who is responsible for student loan debt after divorce, the article stated. A divorce that occurs immediately after a spouse completes a college degree may result in that spouse being held responsible for repaying the student loan. But if the spouse finishes school and the degree results in landing a job with considerable income that benefits the couple for years to come, the court might consider the debt to be the responsibility of both spouses.
There is another exception when it comes to assigning a person responsible for repaying student loan debt: the ability to repay. If evidence shows that one spouse will have high income after the divorce and another will struggle to make payments on the debt, “the higher earner may end up having to fork over some temporary spousal support to cover the ex’s debt payments,” The Wall Street Journal reported.
If you’re considering divorce and you or your spouse have student loan debt that you’re concerned about, consult an attorney who specializes in family law. A qualified attorney can answer your questions and help you devise an approach to settling disputes over who is responsible for repaying the debt.
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