Should I Pay Off Student Loans Before Getting Divorced?

When you’re working through a divorce, student loan debt is probably one of the last things on your mind. With all of the stress that comes with a separation, managing debt might fall by the wayside. But understanding your options sooner rather than later can help you in the long run. Maybe you have concerns about the state of your student loan debt. Maybe you paid off all or part of your partner’s loans and are unsure of what happens next now that you’re separated.

Whether you’re interested in pursuing loan reimbursement from your soon-to-be ex or simply need a plan for paying off your own debt, it can be a challenge to tackle student loan debt with an impending divorce. In either case, understanding your options for paying off loans before or after divorce can help avoid unneeded stress down the road.

Read on to learn about the costs and benefits of paying off student loan debt before a divorce.

You and your partner may have come to your own decisions about who plans to cover which debts or expenses. But it’s still important to understand what the law says about loan responsibility.

As a general rule, any loans — both federal student loans and private student loans — taken out before marriage are the responsibility of the borrower and any co-signers. Debt taken on before marriage is separate property. But if you took loans out after marriage, responsibility is going to differ depending on state laws.

In the nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — loans taken out during marriage are considered marital property (or marital debt) and are owned equally by both partners in the eyes of the court. In the event of a divorce, both parties will be held equally responsible by the lender.

Related: Are student loans community property?

In all other states — equitable distribution states — any separate property or separate debt will not be divided in the event of a divorce. You are only responsible for loans you took out during the marriage.

If you are preparing for divorce — or even preparing to get married — it’s important to understand how your relationship status affects your ability to pay your student loans. Once you’ve left a serious relationship, it may be difficult to adjust to handling finances on your own. Here are some things to keep in mind while deciding when to pay:

• Your monthly payments. Think about how these payments are calculated and how they might change after your divorce. This will depend on what type of payment plan you have. Whose incomes are being considered when these payments are being calculated?

• Filing status. Are you planning to file separately for the first time since your marriage? You and your former spouse could be eligible for an interest deduction when filing separately.

• State laws. In community property states, loans taken out in a marriage are marital debt and the responsibility of both partners. In equitable distribution states, the loans are your responsibility alone unless determined otherwise with a pre or postnuptial agreement or by a judge.

Related: Married Filing Separately & Student Loans

With these factors in mind, think about what payment strategy might work best for your personal situation.

It isn’t uncommon for someone to want to support their spouse by paying off their student loans. But if your spouse asked for a divorce shortly after repayment, you may be interested in reimbursement.

You can ask your soon-to-be-ex to reimburse you for the payment you made towards their student loans before your marriage ended. If they decline, you can ask the judge to order them to pay you back.

Whether or not reimbursement is granted is going to depend on a couple of factors. Ultimately, the decision will come down to whether or not the loans were beneficial to both partners in the marriage. In other words, should student loan debt be seen as a community debt? A judge will consider:

• When were the loans taken out? Has enough time passed for the loans to benefit both partners and any children? Loans taken out less than ten years before the divorce will likely not be seen as a community debt. The educational benefits may not have had time to impact everyone.

• What were the loans used for? Some student loans are used to pay for more than just tuition. Loans that were used to pay for non-school-related living expenses could be considered community debt since the student was not the only one to benefit.

• How did the loans impact the community’s earning power? When the education of someone in the community leads to greater earning opportunities, the student loans that funded that education is more likely to be seen as community debt.

Student loans that have been determined to be community debt are less likely to be reimbursed. The logic is that if everyone in the community benefited from the loans, then there is no reason for someone to be reimbursed.

Related: Marrying Someone With Student Loan Debt

Preparing a prenuptial or postnuptial agreement is a good way to determine who will be responsible for which debts in the event of a divorce. Both agreements may override many state laws and put loan repayment decisions in the hands of you and your ex-partner.

Related: Prenup for Student Loans

For student debt, in particular, speak with a student loan lawyer. They will be able to help you explore repayment plans, refinancing, and other potential debt solutions.

Preparing for marriage also means preparing for a divorce. Whether you’re entering a relationship with debt, or you plan to take out loans down the road, having a plan can help you avoid unnecessary stress. If you’re currently in the process of a divorce, it’s not too late to get informed and come up with a strong plan for your financial future.

If you need help making sense of your student loans as you navigate your divorce, I’m here to help. Schedule a call with me and we can discuss the ins and outs of how your loans will be affected.