Student Loans and Divorce

It has been all over the news about the mountain of student loan debt taken out by college students to fund their education.  As college education costs continue to rise, students are taking out more and more loans.  Some believe that this is setting up a potential "student loan bubble" that could burst and wreak havoc on the economy in much the same way the housing bubble did a few years ago directly leading to the "great recession" of 2008.  With the fact that so many professionals have incurred student loan debt, it is inevitable that student loan debt is an issue that will have to be dealt with in many divorces.

Certainly if the loans were incurred prior to the marriage, the debt is non-marital.  Additionally, ss a general rule, Kentucky has held that student loans are non-marital debt even if taken
out during the marriage.  This goes hand in hand with Kentucky's position that a non-student spouse does not have a marital interest in the educated spouse's degree.  This was an argument that used to be made in cases involving doctors, lawyers, etc. whose spouse supported them through graduate school.

As with most things in divorce litigation, there are exceptions to most rules.  Many times, students who are married take out loans that are in excess of the amount needed to actually finance their education.  The excess funds are used to cover rent and other living expenses during the semester.  If the student spouse can establish that a portion of the debt was used for living expenses and did not all go directly to education, he/she may be successful at getting part of the debt declared marital and forcing the other spouse to share the burden.  This will require some planning and most likely researching costs of education at the time of the loan compared to the amounts borrowed and other possible documentation.  If this is an issue, it is imperative that you discuss it with your attorney as soon as possible to ensure that there is sufficient time to secure all of the necessary documents through the discovery process.

Although the general rule says that student loans will go to the spouse who incurred them, it may not be the situation in your case.

Photo courtesy of Simon Cunningham

Labels: , , , , ,