Could both spouses end up paying for student loans in a divorce?

|

Numerous Americans, including many here in North Carolina, take out student loans in order to pay for higher education. How these loans are dealt with in a divorce largely depends on when they were incurred. If they were incurred during the marriage, both parties could end up paying a portion of the financial obligation.

When one party obtains a college degree during the marriage and student loans are used to pay for them, how the parties deal with those loans could impact what happens in a divorce. Some couples provide for this eventuality in prenuptial agreements by indicating that the party who obtains the loan retains the obligation to pay 100 percent of the balance if the couple does not stay married. Other couples agree to keep student loan separate by not commingling them with other debts of the couple and through other documentation.

However, North Carolina couples who do not make advance preparations to keep student loans separate could find that the debt is considered an obligation of both parties. In this case, the court may account for this by providing some form of compensation to the party who did not obtain the degree, such as an increase in spousal maintenance to cover the debt payments. Any amount awarded may depend on the monetary and non-monetary contributions made by that spouse.

It should never be assumed that the party who took out student loans during the marriage will be solely responsible for them in a divorce since both parties might be held liable for their repayment. If this happens, the lifetime earning potential of the party with the degree can be calculated. It can then be offset against the other spouse’s contributions in order to come up with a fair and equitable way to deal with the loan.

Source: mainstreet.com, “Why the Value of a Diploma and Debt Matters in Divorce“, Juliette Fairley, July 24, 2014

Categories: