Divorce and Student Loans

On behalf of Ronald H. Kauffman, P.A. posted in Marital Debt on Thursday, April 17, 2014.

You’re married and your Husband is in medical school. The burden of his school divorce is the farthest thing from your mind. Maybe you thought: “they’re his loans anyway, so I won’t be responsible.” You may be in for a big surprise.

The Wall Street Journal recently reported that college students who took out loans to earn bachelor’s degrees in 2012 graduated with an average $29,400 in educational debt. Worse, those earning advanced degrees borrowed even more. What happens to these loans in divorce court?

There are two misconceptions about dividing student loans in a divorce:

1. Student loans taken out before marriage turn into marital debt after the wedding.

2. That student loans incurred during the marriage are the responsibility of the student earning the degree.

In Florida, educational debts are treated as any other kind of debt. If a debt is incurred before a marriage it is considered the separate property of the debtor. And, unless a prenuptial agreement says otherwise, it stays that way after a divorce.

This comes as a surprise for many people. But as the Wall Street Journal reports, think of it this way:

“It’s generally like roommates,” says June Carbone, an expert in family law at the University of Minnesota Law School. “The roommate doesn’t pick up student debt….It doesn’t matter if you’re sleeping together.”

Debt division can get a little trickier when the student loans are taken out during the marriage. Different states may have different laws, so how educational debt is divided may depend on where you live and who benefits from the loan.

In Florida, as a general proposition, student loans incurred during the marriage are marital liabilities, and must be equitably distributed between spouses.

The fact that the Wife will not receive any benefit from the Husband’s medical degree after the divorce is not really a factor when dividing student loans.

What should you do? A prenuptial agreement can help you spell out how you and your future spouse want to allocate student debts in the event of divorce. At a minimum, discuss your finances with your partner.

Most people think prenuptial agreements are for the very rich, and to preserve expensive assets. Don’t forget that there’s often a lot of debt to consider too, and a prenuptial agreement is a perfect tool for addressing that.

The Wall Street Journal article can be found here.