Student loans have been in the news quite a bit in recent years, in part because of the pandemic and how the CARES Act put the brakes on many people’s student loan payments. Student loans are a common form of debt people have, are generally harder (though not impossible) to discharge in a bankruptcy compared to other types of debt, and typically have terms ensuring that people will pay on them for a long time. That means, when people get divorced, student loans can sometimes factor into divorce decrees.
So, how might a divorce change your student loan situation?
An article from NerdWallet we recently ran across attempted to shed some light on the matter, with the initial and correct observation that “any student debt you had before you got married will still be yours after a divorce.”
Even in states like Texas that are community property states, assets and debts you acquire before you get married stay yours in a divorce — though if you use part of an asset like an inheritance to help fund a jointly-held asset like a house, that can complicate matters considerably.
The same principle can apply to a student loan, if you refinance one and have a spouse co-sign on the reworked terms. As the article notes, “If you or your spouse co-signed student debt, the co-signer is still responsible for the debt even if you’re no longer married. This includes co-signing a refinancing loan, along with any loans taken to pay for school.”
It also notes that while “co-signing a student loan legally obligates you to repay the debt when the primary borrower can’t,” it may also be possible to refinance your way out of that situation.
“You can refinance in your own name if you qualify,” the article advises, adding, “Otherwise, find a lender that allows co-signers. If you refinance with a co-signer, look for a lender that offers a fast co-signer release — 12 months is usually the minimum.”
The article also points out that if you live in a community property state like Texas, student loan debt accrued while the couple is married is shared debt, just like assets acquired during a marriage are shared assets. “You are both technically liable — 50/50 — for any new student loan debt acquired during your marriage,” the article points out, “regardless of who borrowed or attended school.”
Of course, depending on what route you go with your divorce, it’s entirely possible to negotiate the decree to where the person who went to school is made solely responsible for the debt. But it might not be as easy to convince the lender of that arrangement — be it a student loan or some other kind of debt. Having an electronic version of your decree ready to send to whoever needs to review it is a good idea, but it’s no guarantee to altering a document you and your ex might have signed together.
If you’re curious about how a student loan or other financial obligations might impact your divorce, you can find out more through an initial consultation with the Law Office of Lisa A. Vance. Not only can our team of experienced family lawyers help you chart the course for divorce that best fits your situation, we can also steer to you to a financial professional to work in coordination with our team if we deem that necessary.