Student Loans in New York Divorce

by Ani Mason
Founder | Mason Law & Mediation

For many divorcing couples, at least one if not both spouses have student loan debt. What happens to that debt in the divorce process?

How you “distribute” the marital asset of a degree, license or certification will often impact how the marital debt associated with obtaining it is distributed.

First and foremost, whatever you and your spouse agree to do about your student loan debt—each keep your own, pay it off with a marital asset, split the debt equally (by distributing other assets and debts to compensate)—will almost certainly be acceptable to a court.

However, when you can’t agree as to how to handle your debt, the court is called on to intervene. Its first step will be to identify what student loan debt exists (i.e., what amounts are held by what lenders) between both of you and to determine whether that debt is marital or separate. The analysis the court uses to determine whether student loans are separate debt or marital debt is identical to the one it would use in determining whether an asset is separate or marital. It comes down to when the debt was incurred: before the marriage or after the marriage? (Don’t worry. We’ll talk about situations where the debt was incurred partially before and partially after the marriage.)

If student loan debt was incurred before the marriage, it’s the separate debt of the person who incurred it. If it was incurred on or after the date of the marriage, it’s considered marital debt. (Remember from our discussion of dividing marital assets that simply being considered marital does not mean something is divided equally between the spouses.)

Let’s start by looking at separate student loan debt, i.e., where the loans were incurred entirely before the marriage. Under the law, responsibility for that debt will stay with the person who incurred it. The court cannot assign responsibility for separate debt to the other spouse.

As you can imagine, where one or both spouses brought separate student loan debt into the marriage, debt payments likely continued during the marriage. Perhaps you made those payments with marital income, as many people do? Technically, this means that you paid off or paid down a separate debt of one spouse with a marital asset (your income during the marriage).

Some people see this as water under the bridge and aren’t interested in discussing it further. (It may concern less money than it would ultimately cost to negotiate as an issue.) Others want to recoup their portion of the marital income that went to paying off the other person’s separate debt.

What about where one of the spouses used his or her separate property (e.g., a savings account earned before the marriage) to pay down or pay off the other spouse’s separate student loan debt? The desire to get one’s “money back” may be even stronger where it was not marital but separate property.

Around these issues—i.e., the potential of recouping marital or separate funds used to pay off a separate student loan debt—you’re best served by speaking with an attorney. There’s a chance for recoupment, which is generally greater when you paid for the debt with the other spouse’s separate property than when you used marital funds to do so, but it is not a slam dunk. It’s context-specific, and your attorney will need to assess the facts in your particular situation to be able to give you appropriate advice on how to proceed.

Now, what about student loan debt that was incurred during the marriage, i.e., marital debt? The court is empowered to distribute responsibility for this debt between the spouses however it sees fit. This can mean that responsibility for the debt is assigned entirely to one party, that it’s divided equally between the parties, or a host of other options. Since it’s not feasible to transfer a portion of your student loan debt to your spouse’s name (in cases where a court determines that your spouse should share responsibility for it), other assets and debts will be distributed in a way to accomplish the court’s goal. For instance, if you have $25,000 of marital student loan debt and $25,000 of marital credit card debt, a court might assign responsibility for 100% of the student loan debt to the person in whose name the loans are held, and assign 100% responsibility for the credit card debt to the other spouse.

Founded in 2014, Mason Law & Mediation provides highly-skilled and holistic mediation, Collaborative Law, settlement negotiation, and legal coaching services to individuals, couples and families in New York.