How will student loan debt be divided during a divorce?

On Behalf of | Nov 2, 2018 | Divorce, Property Division

Student loan debt is a significant financial burden for many Americans. After graduation, the average U.S. student owes $37,172 in student loans, and roughly one in four adult have student loans.

One of the most stressful things about a divorce can be managing finances. Perhaps you have a large student debt or your soon-to-be ex does. Either way, you may wonder how student loan debt is divided during a divorce.

Equitable Distribution

New York is an equitable distribution state, so assets are divided equitably during a divorce. Equitable is not the same as equal, so your property may not divided half and half. This only applies to marital assets, which is property you acquired during the marriage. However, it also includes marital debts.

If you or your spouse attended college while married, student loans could be considered part of your marital debt. This will likely depend on several factors.

What was the money used for?

Students loans that paid for tuition and books will likely be viewed as separate debt. However, if these loans helped pay living expenses or other marital expenditures, a student loan may be considered marital debt.

Who benefited?

More than just how the money was spent, who benefited from earning the degree matters. If you or your former spouse recently graduated from college, there would be little benefit to the other person. However, if the degree was earned a long time ago and it created substantial income for both partners, it may be considered a marital debt.

What is your earning potential?

During equitable distribution, each spouse’s earning potential is considered when dividing property. If one of you is a stay-at-home parent, the court probably will not force that party to pay for the other person’s student loan debt.

How does it affect tax exposure?

The court also considers how tax consequences affect equitable distribution. Carrying student loan debt could force one partner to have to pay more taxes than other party. This likely will depend on you and your former partner’s other kinds of debt.

If you are concerned about being saddled with your former spouse’s student loan debt, you may want to reach out a family law attorney that understands the rules regarding equitable distribution in New York.