Who Pays Student Loan Debt in a Divorce?

If you’re going through a divorce and you or your spouse are carrying student loans, you are not alone. As student loan debt becomes an increasing burden for more and more people, many individuals are either bringing this debt into their marriage or taking on student loans during their marriage. In fact, according to the Education Data Initiative, 52% of married undergraduates accept federal student loans. Nearly 50% of federal student loan borrowers are between the ages of 25 to 34. Coincidentally, the average age of couples going through their first divorce is 30 years old.

For divorcing couples, worries about who will pay for student loan debt are increasingly pressing. In this blog we will discuss the way student loans may be allocated in a California divorce.

Are Student Loans Considered Community Property?

During a divorce, it can be challenging to divide what was once a shared life into two separate ones. One of the most difficult aspects of this process is navigating property division. Dividing your marital property encompasses both your assets and your debts.

In California, assets and debts acquired during a couple’s marriage are generally considered community property, meaning that those assets and debts belong equally to both spouses. California Family Code Section 2550 states that the court shall divide “the community estate of the parties equally” unless the parties agree otherwise (i.e. through a prenuptial agreement). However, assets and debts acquired before a couple’s marriage are generally considered separate property and will belong to the spouse who incurred them.

Student loan debt, however, is an exception to this rule. California law treats student loan debt differently than most other kinds of debt.

How Is Student Debt Assigned During a Divorce?

Instead, California law considers student loan debt to benefit, by default, the individual and not the community. California Family Code Section 2641 assigns loans incurred either before or during a marriage for the education or training of one spouse to that spouse. In other words, if you take a student loan out to pay for your education either before or during your marriage, the state of California will consider that debt to belong to you during a divorce proceeding.

California law does, however, provide for a few important exceptions. A court may divide the student loan debt between the two spouses if:

  • The “community” – meaning both spouses together – benefited from the education, training, or student loan
  • The education, training, or student loan incurred by one spouse is offset by the education or training received by the other spouse for which community contributions have been made
  • The education acquired by one spouse through the student loan reduced that spouse’s need for spousal support

How Does the Court Determine if Student Loans Benefited the Community?

The court has discretion when determining whether student loans benefited the community, but there are two “rebuttable presumptions” – or assumptions that the court makes to make this determination. They are:

  1. If the student loans were incurred less than 10 years before starting divorce proceedings, the court assumes that they community did not benefit from the student’s education, and the loan will be assigned to the student spouse.
  2. If the student loans were incurred more than 10 years before starting divorce proceedings, the court assumes that the community did benefit from the student’s education, and the loan will be assigned to the community.

Either of these assumptions can be overcome with sufficient evidence to the contrary. For instance, if you incurred student debt less than 10 years before filing for divorce, you may be able to prove that you and your spouse enjoyed a higher standard of living or acquired significant community assets due to your education. This is why it is important that you consult an experienced attorney if there are student loans at issue in your divorce.

It is also possible to seek reimbursement for expenses that were paid to support a spouse’s education, including tuition, books, fees, and supplies, as long as it can be proven that these expenses were made through community funds. In order to seek reimbursement, it must also be proven that the student spouse’s earning capacity increased substantially due to this contribution of community funds toward their education.

How a Lawyer Can Help You Negotiate Student Loan Debt

If you or your spouse has student loan debt that was acquired during your marriage, it is vital that you hire a reputable attorney who can represent your interests during your divorce, helping to ensure that you and your spouse come to a fair agreement. At Palmer Rodak & Associates, we understand that every couple’s situation is different, and we will take the time to listen to you so that we can help create a legal strategy for your divorce that is customized to your unique circumstances.

If you are, on the other hand, considering getting married, it may be wise to create a prenuptial agreement that states how your current and potentially future student loan debt will be handled and that also accounts for student loan payments that may be made during your marriage.

Whether you are considering beginning a marriage or ending one, the attorneys at Palmer Rodak & Assocciates are here to help you ensure that your future is protected. If you have questions about how student loan debt will be handled during divorce, contact us today at (760) 573-2223 for a consultation.