Who's responsible for student loans in divorce?

Divorce is complicated — especially when finances are involved. But when either (or both) parties have student loan debt to their names, it can be even more difficult (not to mention time-consuming) to sort out.

Unfortunately, it’s an all-too-common occurrence. Just under 45 million Americans have student loan debt. Considering the average age of a first divorce is 30, it’s likely a large majority of divorcees carry student debt when they part ways with their spouse.

What happens to student loan debt in a divorce?

If you took out your student loans before marriage and they’re in your name, then you’re responsible for their repayment — whether you’re divorced or not. It’s only when you or your spouse take out a loan during the marriage that things start to get confusing.

To understand who takes responsibility for these debts post-divorce, you’ll need to know your state’s laws. In most states, if your name is on the loan, you’ll be responsible for continuing to make student loan payments after you’ve separated. If your spouse is on the loan, he or she will. However, if both of you are on the loan, you’ll need to figure out a way to pay the debt back together. Either that or the primary borrower will need to sign a co-signer release to relieve the other party of all responsibility.

FIXED-RATE OR VARIABLE RATE STUDENT LOAN: WHAT IS BEST FOR YOU?

In other states — ones with community property laws — it’s another story. When divorcing in these states, assets and debts are distributed evenly between the spouses, meaning you’ll both be responsible for paying back the loan. Community property states include:

• Arizona
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

California is also a community property state, but it treats student loans differently than other debts. If you’ve been married less than 10 years and your name is not on the loan, you likely won’t be held responsible for the student loan payments.

Does the type of student loan matter?

The type of student loans you or your spouse have will play a role. Private student loans often require co-signers, and if you or your spouse co-signed a loan for the other, you’ll both be on the hook for its repayment.

COMPARE FEDERAL VS. PRIVATE STUDENT LOAN INTEREST RATES

Most federal student loans don’t require co-signers, though, and they’re only in your name. Unless you consolidated both your and your spouse’s federal loans into a single loan during the marriage (which hasn’t been allowed since 2006), then it’s only the borrower’s responsibility to pay back the balance.

What are some student loan repayment options?

If you’re responsible for student loan debt after your divorce (yours or your spouse’s) and you’re not able to make your payments, there are options at your disposal.

You can:

• Refinance your loan: Refinancing into a longer-term loan or one with a lower interest rate can reduce your monthly payments, making it easier to repay.
• Get on an income-based repayment plan: These are only available if you have federal loans. If you qualify, you can make monthly payments based on your income.
• Apply for forbearance or deferment: These options let you postpone your payments for a period of time while you get back on your feet.

If you have several loans, you might also consider consolidating them into a single loan. This can reduce your long-term interest costs and streamline repayment.

There’s still hope

Fortunately, emerging from a divorce with student loans won’t keep you from starting over. As long as you stay current on your payments, you should be able to safeguard your credit, achieve your financial goals, and potentially even buy a home (or keep your existing one).