Getting divorced is hard enough, but divorcing when you or your spouse has student loan debt can be even harder.
According to a 2018 Student Loan Hero survey, 35% of divorcées with student loans said they couldn’t afford to get divorced when they wanted to. And 13% of respondents who entered their marriage with student loans cited those loans specifically as a reason for their split.
Even if student debt hasn’t been a point of contention in your marriage, it can still complicate divorce proceedings (here are ways to crush your debt). So, just what do you do with student loans when you and your mate decide to part ways? It all depends on your situation.
You might not be able to split the debt at all
Let’s get the tough news out of the way first: If you cosigned your partner’s student loans, you’ll still be on the hook after a divorce. That’s because when you agreed to help your spouse qualify for their loans, you also agreed to repay that debt if they couldn’t — married or not.
You can try asking your lender for a cosigner release, but this isn’t guaranteed to work. Not every lender offers this, and if they do, they’re not obligated to grant your request. If your spouse can’t prove that they can repay the debt on their own, you might have to stay on as a cosigner. But don’t panic yet — all hope is not lost.
You may be able to refinance
If you cosigned your spouse’s student loans (or if they cosigned yours and you want a clean break), look into student loan refinancing. Refinancing would shift the debt burden to only one of you, as opposed to both of you sharing the liability.
There are a few considerations to keep in mind here, though. If you have federal student loans, refinancing will transfer your debt to a private lender. When this happens, you’ll no longer be eligible for federal student loan relief, income-based repayment plans (IBRs), or temporary payment deferment while you’re in school or serving in the military.
You could adjust your monthly payments
When refinancing isn’t the best course of action or if you’re concerned about how you’ll pay your student loans after the divorce, look into IBR options. This only works if you have federal student loans, but it can make your monthly debt obligation more manageable.
Depending on how you and your spouse file taxes, your loan servicer might have considered your joint income when you first applied. When you no longer have that second income to rely on, however, you might qualify for a lower minimum payment or you might now be eligible for IBR if you weren’t before.
You may need to split the debt equally
If you live in a community property state, you and your spouse will share liability for each other’s student loans, whether you cosigned or not. Even if you weren’t the one attending classes and even if you didn’t take out the loans yourself, these states still consider you partially responsible for repaying the debt.
This only applies to student loans taken out during your marriage, though. Any debt that you or your partner accrued prior to tying the knot will still be your individual responsibility. If your spouse had $10,000 in student loans before getting married and borrowed another $15,000 during the course of your marriage, you’ll only split that $15,000 during your divorce.
Note: Community property states include AZ, CA, ID, LA, NV, NM, TX, WA, and WI.
You could divide the debt equitably
All other states are equitable distribution states. Courts in these jurisdictions consider a number of factors to determine a “fair and equitable” debt distribution.
These factors include (but aren’t limited to) your contributions during the marriage, your individual incomes and earning potential, and if student loan funds were used to cover joint living expenses. This might mean a 50/50 split, or it might mean one of you takes on more of the repayment obligation than the other.
You could repay your student loans before divorcing
This obviously won’t be possible for everyone, but if you owe a small balance on your student loan, it may be worth looking for ways to pay off your debt before filing for divorce.
Don’t exercise this option blindly, however. If your spouse helps you with this student loan payoff, that might be deemed a marital contribution, which could (but not necessarily) impact the divorce settlement.
You also need to weigh the cost of divorce proceedings and any new bills you’ll take on once you separate. If you’ll need the cash for attorney fees or living expenses after the divorce, it might not be worth paying off your loans ahead of time.
You could develop a postnuptial agreement
If you haven’t begun divorce proceedings or if you’re still debating if divorce is the right move for you and your spouse, you might want to consider developing a postnuptial agreement. Like a prenup, this document will specify how you’ll distribute debts and assets if you end your marriage.
Emotions run high during divorce proceedings, even for the most amicable of partners. Working together with an attorney to iron out a fair debt distribution while you’re still on good terms can spare you a lot of headache and heartache down the road.
You might not need to divide the debt
Depending on when you or your partner took out your student loans, the question of how to divide those loans may answer itself. Remember that any debt you borrowed prior to getting married is yours and yours alone, and the same is true for your spouse. If neither of you took out loans during the marriage, you may have nothing to worry about here.
However, if you borrowed different loans at different times — for example, you got married after you started school but before you finished — some, but not all, of that debt could still be considered marital property. Consult with an attorney, and double-check the dates on your loan statements and on your marriage certificate to be sure.
Splitting student loans during a divorce is a tricky business, but it’s doable. You might need to share your debts equally, or you may be able to divide them equitably, with each spouse taking on what they can reasonably repay.
State law determines much of how debts are portioned out during divorce proceedings, but you and your spouse can take steps now to figure out a solution that works for both of you.
If divorce is on the table, start working with a lawyer and a financial advisor to map out your options. Try to come up with a game plan for how your finances will look pre- and post-divorce. Choosing to divorce is never a painless decision, but preparing your heart, mind, and wallet can alleviate some financial stress along the way.