Attorney Nicole K. Levy answers the question of what happens to student loans in a divorce?

It should come as no surprise that more and more divorces in Massachusetts involve an asset distribution process that includes student loan debt. The ever-increasing prevalence of student loan debt leads to the question of whether divorce courts should assign a portion of one spouse’s student loans to the other spouse in the division of marital debts.

A recent decision by the Massachusetts Appeals Court highlights the problem and offers a valuable opportunity to discuss the arguments for and against the practice.

Appeals Court Assigns Wife’s Student Loans to Husband in Divorce

The case, Bennett v. Bennett (2018), involved a divorcing couple whose case went to trial to resolve child custody and asset distribution issues. The trial took place in Middlesex Probate & Family Court and was presided over by Hon. Jeffrey A. Abber (now deceased).

After the trial, the Probate and Family Court judge issued a divorce decree that required the husband to pay off half of the wife’s student loan debt. Under the judgment, the husband was ordered to send to the wife $375 per month towards her student loans until the loans were paid off in full. This payment represented half of the monthly payment owed and was tax deductible to the husband as alimony. (Of note, alimony was not separately awarded in the decree.) The husband appealed the decision, but the assignment of the wife’s student loan debt to the husband was affirmed by the Massachusetts Appeals Court as falling within the trial court judge’s discretion.

Many of the findings of fact relied on by the Appeals Court in its decision were unique to this case: The Court found that the husband’s student loans had been paid off, while the wife’s had not, and the husband had spent “substantial sums of money during the marriage for his own purposes, without the [wife’s] knowledge.” Had these facts not existed, the case may have been decided differently. However, absent factual findings like these, the question remains about whether it is fair to assign one spouse’s student loan debt to the other spouse in a divorce.

Arguments Against Assigning Student Loan Debt in Divorce

The practice of assigning one spouse’s student loan debt to the other in a divorce may seem unfair on its face, but it is not difficult to imagine scenarios in which such an assignment is equitable. Among the most persuasive arguments against the assignment of student loan debt arises in cases in which the debt was incurred prior to the marriage. Although Massachusetts courts are not required to exclude “premarital” debts or assets from assignment in a divorce, a judge is much more likely to assign 100% of a student loan debt to a spouse who incurred the debt prior to the marriage.

Another argument against assigning student loan debt in a divorce focuses on the benefit the indebted spouses will receive from his or her education. In many instances, a spouse will enjoy all or most of the benefits of his or her education after the divorce is complete. Following the divorce, the indebted spouse may receive all or most of the benefit from additional education and earning potential. The later the student loan debt was incurred in the marriage, the more persuasive this argument often becomes.

Given that the benefit of the higher education follows the spouse who took on the debt, this concept suggests that student loan debt should stay with the spouse who incurred the debt. Since that spouse will continue to receive the benefits of their education through their post-divorce employment, while the other spouse will not benefit from it, it is thought that they should also remain solely responsible for that debt.

A final argument against the assignment of student loan debt in a divorce amounts to a contrast between student loan debt and other forms of debt. In many cases, credit card debts, auto loans, and mortgages could all be justified as contributions to the marital partnership, inasmuch as such debts helped support the marital lifestyle of both spouses. Arguably, student loan debt is uniquely individual in nature. A student loan is an investment in the future of one spouse, and the argument is that the spouse whose resume has been improved by the student loan should be responsible for its payment in the future.

Arguments for Shifting Student Loan Debt in Divorce

Despite persuasive arguments against the assignment of student loan debt, the question of who should be responsible for a student loan debt is far from clear cut and dry. There are strong arguments in favor of assigning at least a portion of one spouse’s student loan debt to the other spouse in a divorce.

These arguments are often at their strongest when the spouse with student loans still outstanding has sacrificed his or her professional ambitions for the sake of raising a family. One strong example involved a stay-at-home spouse who sacrifices his or her career during the marriage. Such stay-at-home spouses may lack the earning capacity to pay off student loans they incurred before or early in the marriage. If a stay-at-home spouse can persuade a judge that his or her non-economic contributions to the marriage enabled the working spouse to excel in his or her career, a judge may find that an equitable division of the student loan debt is appropriate.

Another argument in favor of dividing student loan debt can be found in a case like Bennett, where it appears that one spouse’s student loan debt was paid off using marital funds, while the other spouse’s was not. In such case, basic fairness argues in favor of equal treatment for both loans.

Finally, an argument can be made for dividing student loan debt if the indebted spouse is paying a substantial long-term alimony or child support order. Here, the indebted spouse can argue that the recipient spouse is continuing to receive the benefit of the indebted spouse’s education in the form of alimony or child support, such that it is only fair for the student loan debt be treated as a marital asset. A similar argument can be for student loan debt incurred by a high-earning spouse early in the marriage, if that spouse’s resulting education and earning capacity enabled the spouses to accumulate substantial assets over the course of the marriage. Both arguments are built around the notion that a former spouse who enjoys the “upside” of the indebted spouse’s increased education and earnings should also share in the “downside” of the student loan debt.

In general, if a student loan debt was incurred early in a long-term marriage, and the indebted spouse’s education resulted in increased earning capacity and the accumulation of wealth, then the student loan debt is more likely to be divided as a joint debt. However, student loan debt that accrues prior to the marriage – or late in the marriage – is generally less likely to be apportioned between both parties. Finally, when spouses were only married for a short time (i.e. less than 5 years), student loan is generally less likely to be divided between the parties at the time of the divorce.

Student Loans are an Increasing Problem in the United States

The issue of how to apportion student loan debt in a divorce is not about to go away. Since 2007, student loans have seen a 157 percent growth, and now total $1.5 trillion in debt. With tuition rates increasing and wages stagnated, dividing student loan debt in a divorce proceeding is going to become even more commonplace in the future.

About the Author: Nicole K. Levy is a Massachusetts divorce lawyer and Massachusetts family law attorney for Lynch & Owens, located in Hingham, Massachusetts and East Sandwich, Massachusetts. She is also a mediator for South Shore Divorce Mediation.

Schedule a consultation with Nicole K. Levy today at (781) 253-2049 or send her an email.