The Disposition of Student Loan Debt in a Divorce
A student loan, nowadays, can be quite significant. It may very well run into six figures. A number of professional couples carry student loan debts from their college years. Now, in a divorce, just like the assets are divided, the debts have to be divided as well. The question is whether student loan debts are considered as marital debts or separate debts.
For what purpose the student loan was used for
If the student loan was used solely for the purpose of pursuing the degree of one spouse, then it may be considered as a separate debt. For example, the money was used only for paying the tuition fee, to buy study materials, for projects, and so on. However, if the money was used for living expenses as well, apart for education purposes, then the debt may be considered as marital debt. Since the money benefited both the parties, both of them have the responsibility to pay it back together. In California, the enhanced earning ability of a spouse as a result of acquiring a degree remains with that person itself. That is, the income earned by that spouse belongs to him/her, the other party does not have any right to that income.
The earning ability of each spouse
The court will look at the earning capacity of the parties involved while deciding on the student loan debt. If one spouse has literally no income or his/her income is very low or the earning potential of that spouse is very low, then the court may ask the other spouse to take care of the student loan debt. While this may not seem fair to the spouse burdened with paying off the student loan debt, especially if the money was also used for household expenses, the court sees it only as fair since the other party has no income or only limited income.
The tax benefits
The tax benefits may make it desirable for one party to assume the whole student loan debt if the other part agrees to take care of another debt, maybe the credit card debt. This is more or less a negotiation. If both the parties find it working to their benefits, then it is something that they will no longer have to argue about or ask the court to decide.
The intended purpose of a student loan is to use it for educational purposes. If it is used only for educational purposes, then a lot of complications can be avoided during debt division.
Getting divorced in California can be complicated. Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.
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