Student Loan Debt and Your Divorce—Who Ends Up Paying?

Student debt is increasingly becoming the principal debt commitment for people in their 20s, 30s, and even their 40s and beyond, overtaking credit card and vehicle loan debt (and often an obligation that makes even acquiring home mortgage debt difficult). In a divorce between a couple with significant student loan debt, the question of who will be responsible for the debt after the marriage, as well as whether the other party should be reimbursed for any payments made on the debt during the marriage with community funds (income earned during marriage), can be a major point of contention.

With over 45 million Americans struggling with student loan debt, it is no surprise that a significant number of California residents take out student loans before or during marriage. Given that the average age at which people get divorced is 30, many divorcing spouses are likely to be encumbered with a large amount of school debt. Student loan debt will likely be your responsibility if you incurred it, however, due to the laws of some states, your spouse may be responsible for repayment, as well. 

General Rule Regarding Student Debt During a Divorce in California

California is a community property state, which means that a marriage or domestic partnership registration creates a legal “community” between two persons. Any property or debt gained by one person during the marriage or partnership is considered to be the property of the community, not the individual who accumulated it. Community property is defined as “any property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in the state,” according to California Family Code section 760. Community property is usually shared 50/50 at the end of a divorce.

If a person has student debt before marrying, the debt is considered separate property, and the husband is not responsible for it. If both spouses consolidated pre-marital student loans into a single loan in both partners’ names, then it is likely considered community property. This is not the case, however, if a student loan is taken out while married.

According to California law, debt incurred to finance a person’s education benefits that person throughout his or her life after the marriage, and it would be unfair to make the other spouse pay for that educational debt after the marriage when that spouse is not benefiting from the education in the form of increased family income.

Exceptions to the General Rule 

However, under California Family Code section 2641, courts can make three exceptions to this general rule (a spouse’s student debt is their own burden), requiring the non-student spouse to be accountable for at least some of the debt after the marriage if:

  1. “The community has substantially benefited from the education, training, or loan incurred for the education or training of the party.” Courts will presume that both spouses did not “substantially benefit” from the education when incurred less than 10 years before the filing of a divorce action, and courts will presume that the community did benefit when more than 10 years have passed since the contributions. 
  2. “The education or training received by the party is offset by the education or training received by the other party for which community contributions have been made.” Meaning, both parties benefited from a community-funded and/or debt-financed education.
  3. “The education or training enables the party receiving the education or training to engage in gainful employment that substantially reduces the need of the party for support that would otherwise be required.” Put simply, this means while assigning debt obligations, the court will consider how spousal support figures are changed by either party’s schooling.

These exceptions can and generally are contested or negotiated when going through a divorce. The above factors are not the strict law and a judge will use their discretion when making an overall ruling when assigning property and debts during a divorce. 

What Happens if You are Not Co-Signed on the Student Debt? 

In many circumstances, if you co-signed student loans on behalf of your partner, you will be responsible for repaying that debt even if your marriage ends. This may not always be the case. A good example of when this is not true is if you are able to refinance in your own name or locate a lender who accepts co-signers, then you may be able to free yourself from your former spouse’s student loan debt.

If they are private loans in question, it is likely the party needed a co-signer. If you or your partner co-signed a private student loan during your marriage, even if you divorce, the co-signer is legally liable. In this scenario, looking into co-signer release possibilities would be a good idea.

Reimbursement of Student Debt Payments

The entitlement to reimbursement under California Family Code Section 2641 is not automatic, and the spouse who wants it must file a formal legal request and show that communal assets were used for reimbursable expenses. A spouse seeking reimbursement must also show that community contributions significantly increased the student spouse’s earning capacity, and that the community did not get any benefits in exchange for their contributions during the marriage or domestic partnership and prior to the divorce.

Tuition, books, fees, and supplies are all reimbursable expenses for a spouse’s education, but they do not include basic living expenses like accommodation, food, and medical care.

It is not always easy to prove the facts that establish an entitlement to reimbursement for educational expenses under California law. Having an experienced divorce attorney on your side will help increase your chances of reimbursement. 

Contact The Law Offices of Steven M. Bishop

Among the most common misunderstandings about student loan debt is that all debt incurred prior to marriage becomes shared debt after marriage. This is not always the case, however, which is why you consult with an experienced attorney to go over all aspects of your divorce and student loan debts.

If you are going through a divorce and either party has student loan debts, either incurred before or during the marriage, contact an experienced divorce attorney today. For a free consultation call The Law Offices of Steven M. Bishop at 619-598-0152 or contact us online at our website. 

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