How Student Loans Are Treated in a Divorce

Let's Untie the Knot | How Student Loans Are Treated in a Divorce

When it comes to the division of property, Oregon is an equitable distribution state.  This means that courts divide both assets and debts in a manner they deem to be “fair.”  Depending on when student loans were taken out and how they were treated during the marriage largely determines whether the court will view them as marital property or community property.  The definitions of marital property and separate property are very straightforward. Marital property is generally anything acquired during the marriage or anything that one spouse brought into the marriage that he or she then commingled with marital property.  For instance, if you owned a car before the marriage but then used joint funds to pay for repairs, the car would be considered marital property.  Separate property consists of things obtained outside of the marriage, like gifts or inheritances.  The best way to maintain property as separate is to enter into a prenuptial or postnuptial agreement specifying it as such.

For the most part, student loan debt acquired before marriage remains separate property.  You can even draft a prenuptial agreement classifying it as such.  Ideally, each spouse takes responsibility for his or her debt and it is a straightforward solution.  That said, situations like making payments from commingled funds can change things and a court may consider the loans to be marital property.

When student loan debt is acquired during a marriage, the situation becomes more complicated.  For example, with federal loans the name of the person on the loan is the biggest factor.  If you are the party with your name on the loan, the loan generally sticks with you as separate property.  In contrast, private loans often require a co-signer and that co-signer is often the spouse.  In that case, both spouses may be liable for the debt.

An additional consideration is which spouse makes the payments.  If one of the spouses is in school, often the other spouse is the breadwinner and is making the periodic payments.  If you are the party who is paying for your spouse the court may compensate you in the divorce proceedings.