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What happens to student loans in divorce?

On Behalf of | Jan 16, 2023 | Blog, Divorce

Student loans have a significant financial impact on many New Jersey residents. Yet, what happens to those who decide to divorce? Who is responsible for student loans after couples split up?

Timing determines responsibility

If you took out any student loans before marriage, the debt remains yours alone. However, if you or your spouse took on new student loans or refinanced loans during your marriage, both of you could be responsible for repaying that debt after your divorce.

If you or your spouse, co-signed any student loans during your marriage, including those your children may have taken out, you could also be responsible for repaying those if the primary borrower is not able to repay the funds. However, you can detach yourself from co-signed debt in one of two ways. If you qualify, you can refinance the debt or find a lender that allows for a fast co-signer release.

If you are enrolled in an income-driven repayment plan, repayment of the debt is often based on the income of both spouses. Let your lender know about your impending divorce to adjust your payments as soon as possible.

How to split student debt

New Jersey is an equitable distribution state, meaning that each spouse has a claim to property and debt. Splitting debt is part of property division in divorce cases, so if you and your spouse can’t decide on how to spit student loan debt, the courts will do it for you. It is likely in your best interest to determine who should assume the loans before you go to court.

Splitting debt, like splitting your marital property, is easier said than done. If one spouse was primarily responsible for using the money from the loans, the other might have an equal amount of other debt assigned to them as part of the divorce agreement.