How Divorce Affects Student Loans
California is a community property state. It means that all properties and debt acquired during the marriage will be divided equally when you divorce. Student loans, on the other hand, may be treated differently.
Many professionals have substantial student loan debt. It is no surprise that student loans come as an issue between divorcing couples in California. Your family law attorney in Orange County can help you reach an agreement on how to handle student loan debts.
What Happens to Student Loans During Your Divorce?
California’s Family Code - FAM § 2641 sets the stipulations on how student loans will be divided during a divorce. If there is no prenuptial agreement that addresses how these loans will be handled, the conditions in the code will follow. Here are some of them:
Student Loans Acquired Before Marriage
All debts acquired before marriage are separate property, and the same rule applies to student loan debts. These loans will not be divided during a divorce and will be the sole responsibility of the borrower.
Consolidated Student Loans
Some married couples decide to consolidate their student loans after they get married. Consolidation of student loans gives the benefit of a single monthly payment and access to additional loan repayment plans and forgiveness programs. However, this can affect the division of your properties and debt during divorce.
Even if both of you incurred the individual student loans before your marriage, you now have a shared responsibility for the new combined loan. It is now considered to have been taken at the time the loans were consolidated, regardless if both individual loans were taken before marriage.
The consolidated loan may now be considered community property that could be divided accordingly.
Student Loans Acquired After Marriage
All debts incurred after marriage, under California’s community property laws, are to be divided equally between spouses. However, these laws do not apply to student loan debts.
If you have been married for less than ten years, student loans incurred during that time may remain separate property. The presumption is that the community has not benefited from the education or training made less than ten years before the divorce was filed.
The presumption is different if you have been married longer. It won’t be easy to prove that the community did not benefit from the training and education taken by the other spouse during those years. As such, student loan may be treated as community property.
Of course, there are exceptions to these rules. A family law attorney in Orange County can help you clarify these things during your mediation and negotiations.
The following conditions can affect the decision on the division of debt:
· Whether both spouses took student loans during the marriage.
· Whether the training and education received reduced the spouse’s need for financial support from the other spouse.
How Can the Community Benefit from Student Loans?
There are situations when assigning the entire remaining student loan to one spouse may be considered unjust. It happens when the community significantly benefited from the education and training received by the spouse who took the loan.
For example, the wife decided to finish medical school. She took out a student loan of $150,000 during the marriage. After completing medical school, her earning capacity increased from $25,000 to $170,000 a year. This increase in income allowed the family to buy a new home, a new car, go abroad on vacations, and send the kids to private schools.
Ten years later, the couple decides to file for divorce. There is still a remaining balance of around $100,000 on the wife’s student loan. In this situation, it is evident that the community has benefited from the education and training that the wife received with the student loan. It may be unjust to require the wife to pay for the remaining balance all by herself.
How Can Divorce Mediation Services Help You?
Taking the route for alternate dispute resolution may be the best thing that you can do when filing for divorce. An experienced divorce mediation attorney in Orange County can help make the process easier for you and everyone involved.
In mediation, your family law attorney does not represent either of you. He or she is there to talk with you and listen to your concerns and fears. Each marital problem is unique, and there is no single solution band-aid to these problems.
The same can be said with the division of student loan debts. The solution to the division of debts is not as simple as black-and-white. Your divorce mediation attorney can help you reach a reasonable agreement where everyone benefits and leaves the room happy.
Filing for Divorce? Let Cordial Family Lawyers Help You.
Our reputable flat-fee divorce attorneys will help you find the solution to your marital disputes through peaceful and amicable discourse. We offer flat-fee documentation and processing, flat-fee prenuptial or post-nuptial agreements, and flat-fee mediation services. Our services also come with virtual options for your safety. Call us now for a divorce lawyer free consultation.