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Student loans and divorce

On Behalf of | Nov 17, 2016 | Property Division

Kentucky courts follow the rule of equitable distribution when dealing with the division of marital assets during divorce proceedings. This also applies to marital debts such as student loans. However, as is the case with other indebtedness, the decision could hinge upon when the student loan was taken out.

Student loan debt that predates the marriage is considered to be separate property and will not be the responsibility of the non-borrower after the divorce has been finalized. However, all debt that is incurred during the marriage is considered marital obligations, so the court may require both departing spouses to be responsible for any student loans that were taken out while they were married. If there is a wide income disparity between the former spouses, then the rules of equitable distribution may require the wealthier one to shoulder more of the loan payments.

If the divorcing couple was married prior to 2006 and took advantage of a program that allowed them to consolidate their individual student loans into one master loan at a lower interest rate, then that loan will be considered marital debt regardless of whether either or both of the original loans were taken out before the couple was married. Congress has since eliminated this program for married couples, however.

Debt and property division does not have to be determined by a court. In fact, most divorces are resolved by negotiation, and the attorneys for each estranged spouse might be able to assist in arriving at a comprehensive settlement agreement that addresses this issue as well as other applicable ones.

Source: Wise Bread, “Does Divorce Affect Your Student Loans?”, Ashley Eneriz, Nov. 8, 2016