What happens to student loans in a divorce?

Texas is a community property state, meaning all property acquired during the marriage by either spouse is presumed to be part of the community and, therefore, subject to division by the court in a divorce.  But what about debts, such as student loans?  In Texas alone, almost 3.4 million people have unpaid student loans that total more than $111 billion.  Understandably, a lot of people fear becoming responsible for their ex-spouse’s student loans post-divorce.

If you or your spouse obtained a student loan before the marriage, the student loan is considered a debt of that person’s separate estate, and the person whose name is on the loan will be 100% responsible.

If you or your spouse obtained a student loan during the marriage and used the money for education-related costs, the person whose name is on the loan will be 100% responsible.

However, if you or your spouse obtained a student loan during the marriage, and evidence shows the loans paid for living expenses that benefited both parties, the debt could be considered part of the community estate.  In this case, it will become one of many factors that are taken into account in dividing the entire community estate.

What about reimbursements?  Many people want reimbursement for the payments made on one spouse’s student loans during the marriage.  Texas law clearly prohibits reimbursement claims for payment of student loans owed by one spouse.  Much like buying groceries or paying for gas, these payments cannot be reimbursed.

Refinance student loans are another issue that arises during a divorce.  If you or your spouse co-signed student debt, including during a refinance, the co-signer becomes responsible for that debt.  In a situation where both parties’ names are on the student loan, the loan will be considered part of the community estate.

If you are going through a divorce and you have student loans, you should also speak with a financial planner because your options for repaying student loans may change post-divorce.  It is also important to have an attorney knowledgeable about property and debt issues.  The attorneys at The Draper Law Firm are ready to help you be proactive in navigating these issues.

Blog post by Samantha Mori

 

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