graduation cap and money

Dealing with Student Loans in a Divorce

If you’re ready to file for divorce, you’ll have to prepare to tackle one of the most significant undertakings: dividing the property you and your spouse share. Any assets, property, money, or debt you and your spouse incurred during your marriage will likely be considered marital property that must be divided when you split.

But what happens when one spouse is saddled with student loan debt? Will the other spouse be responsible for that debt?

Who Pays Student Loan Debt in a Divorce?

California is a community property state, which means that all marital assets – including debts – are generally split equally in a divorce. If one person took out their student loan before getting married, it will likely be considered separate property that will not be divided between the spouses. As such, the person who took out the loan will still be responsible for paying it.

However, student loan debt could be considered a marital debt if the person incurred it after the couple got married. Though you and your spouse can agree to assign the debt only to the person who took out the loan, it is possible that both spouses could be made responsible for paying it. That said, if the loan is only in one person’s name and the other spouse’s credit was not considered when the loan was issued, that spouse might be off the hook for their partner’s debt. Judges will consider a variety of factors when determining how student debt will be divvied up after a divorce.

Loan Consolidation or Refinancing

One exemption to this policy is if the spouses consolidated their student loans after getting married. If you consolidated your loans with your spouse’s, you are both responsible for the combined loan. Once consolidated, the debts are considered to have been incurred on the day they were consolidated – not the day the original loans were taken out.

Consider a Prenup

If you or your soon-to-be spouse has student loan debt, it might be in your best interest to sign a prenuptial agreement. In a prenup, you and your partner can outline how you want student debt to be handled in the event of a divorce. This can protect both you and your new spouse from having to incur each other’s debt.

To learn more about dividing debt in your divorce, call Alternative Divorce Solutions at (949) 558-2624.