Student loans - Do Marriage and Divorce affect the debt?

Are you wondering about the affect of marriage and divorce on student loans? If yes, then learn about debt before and after marriage, consolidation and refinancing of loans, effect on credit score and more.

Updated by Gowtham Ramesh on 16th August 2019

Developing a healthy marriage could be tough work for many people when you do not have financial stability. Debts could be one big source of struggle. No matter how much you think love could conquer, if your marriage is piled over by debt after debt, your marriage will be put under a lot of undesirable strain.

Statistics show that 44+ million people are in student debt as of June 2019. If you are one among the struggling ones, you need to be informed about how your student loans could affect your marriage financially.

In this article, we will talk in detail about the role your spouse plays or will be playing, with regards to your student loans, or vice versa. Student loans are also one of the main reasons for divorce, so we will be covering that issue too, with ways to avoid such undesirable outcomes and what would be the effect of divorce and marriage on student loans. 


List of contents


Student loan debt in America

Postgraduate education and colleges use to be more affordable than it is now. It seems like the cost of education has skyrocketed. Research shows that the total student loan debt has reached a whopping $1.5 trillion from over 44 million Americans which includes both the federal loans and private loans. The average student debt is around $34,000.

It seems the higher the degree of the student is, the higher their loan amount is. Consumer Financial Protection Bureau shows that the number of borrowers who owed more than $50,000 in debt, their amount has been tripled over the past 10 years.

It is not only the principal of the loan that is burdensome. Interest accrues on a daily basis. On top of that, every unpaid interest gets capitalizes for many of the loans. The increase in the loan amount is exponential every time a borrower goes into default.


Student Loans and Marriage

We will discuss the situation of debts incurred before and after marriage and the laws which govern them. These debts are debts in general and they also include student loan debts.

Survey results

According to a survey which was conducted on marriage and debt by the National Foundation for Credit Counseling, 37% of people said that they won't marry someone until they completely pay off their debt.

  • 46% of them said that they would marry someone in debt and work hard to pay it off together

  • 10% said that they would marry someone in debt and not help to pay their debt

1 - Debt incurred before marriage

According to the Common Law, if you or your spouse have any individual debts before marriage, only the debtor would be responsible for it even after marriage.

However, the responsibilities of a cosigner remain the same before and after marriage, i.e, if you have cosigned the student loan or any kind of debt of your spouse before marriage, you would still hold the same responsibilities after marriage.

Similarly, if you and your spouse opened a joint account before marriage, you are still equally responsible for any debt on that account after marriage, whether the debt is a loan, credit card debt, or anything else.

This law is followed by the majority of the states in America.

2 - Debt incurred after marriage

The situation gets a little complicated if debts are incurred after marriage. The nature of the debt and determination of who is liable for it will differ from state to state.

According to the Common Law, if you or your spouse has incurred individual debts even after marriage, only the debtor is liable for that debt. However, in special cases where the debt is used for the family or equal benefits such as food, children’s education, and more, liability may still be shared equally.

Similar to debts incurred before marriage, the responsibilities of a cosigner remains the same before and after marriage, i.e, if you have co-signed the student loan, or any kind of debt, of your spouse, you would hold the respective responsibilities.

However, there are 9 states in America who follow the Community Property Law. These states are known as the Community Property States and include the following.

  • Arizona

  • California

  • Nevada

  • Idaho

  • Washington

  • New Mexico

  • Texas

  • Louisiana

  • Wisconsin

According to the Common Property Law, any debt, shared or of an individual, after marriage is considered as shared debt. It means that you and your spouse are equally liable for all debts incurred after marriage, regardless of the person who or how the debt was incurred.

All these laws can be modified and changed by the state and they may differ from state to state. Some states may add or remove parts of this common law. It is wise to be well informed about the laws in your concerned states before getting married.


Student Loans and Divorce

Dealing with student loans and divorce is more complicated and it needs a lot of knowledge in advance. If you are married with the student loan debt and looking for a divorce then these are some processes that will affect you. There are a lot of factors that are required to be considered so let's find out who will be liable for student loans after the divorce?

State Law

When you are advancing for a divorce you need to divide all of your assets and debts based on the laws of the state you are residing in.

Anything which was owned jointly will be considered as marital property and will be divided based on how your state administers these divisions. It will be different under community property law and equitable distribution.

Under Community Property Law, all properties will be split into equal halves since both of the spouses are equally considered as the owner of every single property.

Under Equitable Distribution, the division of properties is more complicated. One party of the marriage can make legal claims for a property for a fair and even-handed portion of the assets. This means that the division of the assets will not be in equal halves.

Most of the states implement Equitable Distribution. The court will make the final decision on what constitutes a fair and equitable distribution of properties


Important things to look for

If you are going through a divorce and going to divide your student loan debt, here are 3 pointers that can help you in coming up with a determined and a fair outcome.

1 - What was the money utilized for?

In most of the cases, the funds from student loans are used for the payment of tuition, school books, other fees, and educational supplies.

However, a portion of the money which was borrowed as a student loan may unavoidably go to living expenses and other costs that benefit the entire family. This needs to be taken into consideration for the purpose of repaying the debt and in the calculation of how each of the spouses can benefit from the money.

2 - What is the earning potential of each spouse?

When looking into the calculation of the equitable distribution of assets and debt, take into consideration each of the spouse's abilities to support repayment by themselves and how it may affect any dependent individuals.

If one of the spouses has no significant income or the negligible potential to earn on their own, then it would be less likely for the court to incur to the individual, a part of the student loan taken by the other spouse.

3 - Did the borrower earn a degree after getting married?

If the student loan was used to earn a degree after getting married, then the degree could be considered as marital property and the debt will be distributed accordingly. This will depend on the law of the state you live in.

Certain states such as in New York, the professional degree achieved within the marriage can be considered as marital property. The debt incurred in the process of obtaining the loan is also considered as marital property and almost always categorized as a marital debt. This means that both spouses are equally responsible for the portion of student loan debt repayment.


Part of assets and student loan debt

Under some cases, the student loan debt is under the responsibility of the person who acquired it. These are exceptions based on the personal situation and what the court decided to be a fair and equitable division for both of the parties.

Make sure to consider all the possibilities and consult with a lawyer in advance to divorcing so that you don't get any unfair responsibility from your spouse’s debts. Divorce is never an easy process so do not make it any more difficult for you with unfair distribution of assets and debts.


Servicer's role in debt

The student loan responsibilities after the divorce specifically for the Federal Loans will be based on the name on which the loan has been taken. 

If you and your ex-spouse have a parallel agreement on the payment arrangement which requires one of you to help pay it off, you may do so as per your will. If that is not the case, the servicer will be enforcing every later activity on the loan to the person whose name is on the loan.

It is fairly simple to understand. The servicer will only follow the protocol and do what they are meant to do. 


Spouses could be held accountable

Under unfortunate circumstances, the spouse responsible for the student loan may pass away. All Federal student loans and most of the private student loans provide a death discharge if the borrower dies. There are some private lenders who do not provide death discharge. Our best advice is to go through all the terms and conditions of the loan and be thorough with every feature of the loan before signing yourself into any form of legal bindings.

If you are going to school again after marriage, your spouse may co-sign for your loan. In such cases, they will be legally responsible for the debts if you fail to make any of the payments. Getting a student loan after marriage without your spouse as a cosigner could also still state your spouse as liable depending on the law of the state you reside in.

If you are looking into refinancing or consolidating your student loans with those of your spouse into one single payment then you might be disappointed by your choices. Not all refinancing or consolidation programs favor couples in debt but consider just one party to have the sole responsibility of repayment. You may end up being responsible for a huge part of your spouse’s debts even after the divorce which could have been avoided otherwise.


Affect on credit score

Some think that just filing for divorce will negatively affect the credit score but that is not necessarily true. What can really affect credit score is the process of changing your bill. Making big mistakes like selling a house, refinancing or restructuring debt can have effects on the credit score, where some can increase your score, the others will decrease it.

If you get married, it won't change your credit reports, unless you have a huge debt from marriage. 

1. Changing name

If you change your surname and inform about to this change to the creditors, there will be certain updates on your credit reports. But this doesn't mean you'll have to start working on your credit from the beginning. Your new name will be listed as alias along with your old name. 

However, look for inaccuracies that may occur in your credit report due to the name change. 

If you are in the process of reassessing your financial situation on yourself, then you need to get all important documents such as credit reports and scores. If you have not seen your credit score in a while this could help you out. Be aware of your credit score and try to avoid any errors on the credit review.

2. Spouse's history

The credit history of your spouse will have no negative effect on your credit profile. In case you open a joint account, only then the information will be shared on both the reports. However, if you're buying things like a house together, then the negative credit history of your spouse could affect yours.

3. Joint user

You won't automatically become a co-signer/user of your spouse's account. But if you wish to do that, you will have to request the creditors for the same. You'll have to, however, ask the creditor if the authorized user that you'll become will be reported to the credit agencies.

If you open up a joint credit card with your spouse, the accounts will appear on your credit report, whether they're good or not. 


FAQ's

  Can student loans affect your spouse?


Spouses are not technically responsible for their partners' student loans. Your spouse's student loan debt does not affect your personal credit, or if your spouse dies, you are not obliged to pay off the loan. However, as married partners, inevitably finances become intertwined.

  Are Student Loans considered marital debt?


You each take responsibility for your own student loans and make the payments. Legally, any student loan debt you incurred before getting married is considered separate property and remains so after the divorce (with the exception of a prenup stating otherwise).

  Does getting married affect student loan repayment?


If you're on an income-driven repayment plan for your federal student loans, getting married could affect your payments. If you file your taxes as “married filing jointly,” your income and that of your spouse will be combined. As a result, your Income-Based Repayment bill could go through the roof.

  What happens if I can't refinance after divorce?


When they refinance the loan to one spouse's name, the spouse whose name is no longer on the loan will not see a credit drop even if the other spouse stops making payments. Then you have a divorce settlement contract that's basically worthless because it says someone else is responsible who can't pay.