Now that the student loan pause has ended, many families are feeling the financial crunch. Over the last 10 years, student loans have become an enormous burden and for many individuals, it is the single largest debt they own, even more than a mortgage. If you’re a doctor or an attorney or a pharmacist, it’s likely that you have debt that is the size of a mortgage. During the marriage, you find a way to make the payments work, but what happens when you divorce? Does the debt get allocated between spouses or does it just belong to the person who acquired the debt? Many people going through a divorce worry about this, because even someone making what seems like a great income can have extraordinary expenses when you consider student loans.
The guiding principle for equitable distribution in Pennsylvania is that debt incurred during marriage is marital. This is so even if just one person acquires it. It’s the same thing when one spouse runs up the credit card debt; if it happened during the marriage, it goes into the total calculation of the marital estate. So if you took out student loans during your marriage, those loans will be considered marital debt.
The issue of course isn’t whether the debt is marital or non-marital. The real answer that spouses want to know is “who pays for the marital debt.” If you and your spouse can’t come to an agreement, it will be up to a judge to decide how the debt is allocated. Pennsylvania doesn’t require that every single debt be split down the middle just because you acquired it during the marriage. Instead, in the case of student loans, the Court focuses on who benefitted from the education. Inevitably, the one who benefitted is the spouse who received the degree. This is so even if it was a joint decision for the spouse to get a degree, or if the spouse was severely underemployed during their studies. Pennsylvania Courts reason that if you’ve received a law degree, medical degree, or even a nursing degree, you are ultimately the person who benefits from the education after the marriage ends. Your former spouse can’t use your education to increase their earnings; they only benefit from your degree because of your marriage. For the portion of your loans specifically used to finance a degree, you can expect the judge to decide that you were the sole beneficiary from the education.
There is a wrinkle though: the spouse who incurred the loans benefitted from the portion that was used to finance the degree
. Not everyone takes out exactly the amount they need for their education. It’s extremely common to take out more than required so you can manage regular living expenses; this is particularly true if you’re going to school full-time and aren’t able to work as a result. In those cases, the student loans benefitted the marriage itself, and that portion can be allocated between spouses. You need to prove you did this though. The most obvious way would be to show a paper trail of student loan funds being deposited into a joint bank account. If you didn’t have a joint account, then the other way would be to show a deposit and that they were used for marital expenses. As you can imagine, this can be challenging because it requires you to recreate how you used your funds.
If you want to consider asking for a portion of your student loans to be allocated between you and your spouse, it’s critical that you speak with an experienced family law attorney. They will help you identify how much of the debt could be allocated, how to establish a paper trail proving your funds were used to pay marital expenses, and ultimately, calculate the total distribution if the loans are allocated versus not allocated. Doing this kind of homework in advance will make for a far smoother equitable distribution process.