In the United States, student loan debt has reached $1.448 trillion, and 43 million borrowers are reported to have federal student loans. In mid-2020, federal student loan debt was frozen as a way to help those struggling financially during the pandemic, and the freeze has been extended several times. While the freeze was set to end on August 31st, 2022, President Biden announced that the pause on payments has been extended through December. He also shared the administration’s current plan to help forgive $10,000 of student loan debt for all borrowers.
If you or your spouse has student loans, you are likely happy about this news. However, if you are planning to get divorced, you may be worried about who will be liable for the remaining balance of either party’s loans. Below, we will outline how student loans and debt is divided in Pennsylvania divorces.
How Is Debt Handled in a Pennsylvania Divorce?
If you and your spouse plan to file an uncontested divorce, you will have to agree on the terms of the debt division (as well as all the other terms of your divorce). When spouses agree on debt division, each spouse often agrees to pay off the debt on their credit cards or loans. Complications and disagreements often arise when it comes to joint credit accounts or shared loans.
If a couple cannot agree on the terms, they will likely file contested and leave the determinations up to the court. Pennsylvania is an equitable distribution state, and debts accumulated during the marriage will be divided in a fair and equitable manner, which isn’t necessarily equally or 50/50.
What Happens to Student Loans in Divorce?
What happens to either party’s student loans depends on how you file and when the debt was accumulated. If your spouse came into the marriage with their student loans, that debt will remain their own. However, student loan debt that was incurred during the marriage is subject to division. The court will consider a variety of factors when making a determination, including:
- Each party’s income
- The borrower spouse’s ability to repay the student loans alone
- The ways that the non-borrower spouse supported the student spouse (i.e. putting off going to school/college themselves, handling extra household responsibilities or childcare, etc.)
- The extent to which the non-borrower spouse benefited from the other party’s education or degree (i.e. financially, socially, etc.)
In Hicks vs. Kubit, the Pennsylvania court ruled that the student loans were a marital debt but did not have to be treated the same as other debts as the loans were personal in nature. The court then gave 100% of the loan to the spouse who received the education and held that the loans did not offset the assets that the spouse responsible for the loans received.
Because of this case, you should also consider how the loan was used. If the loan is subject to division but was only used to pay for school, the party who received the education may be liable for most or all of the debt. However, in cases where the loan covered a couple’s housing or benefited both parties, the court may
It is also important to note that if a partner acted as a cosigner on their spouse’s private student loans, they can still be affected and legally responsible for the loans until they get a release from the lender. While your divorce settlement may absolve you of responsibility for making payments, the settlement doesn’t automatically remove your name from the account or affect your contract with the lender.
If you cosigned on a student loan or any other type of loan that the other party retains after the divorce (like a joint mortgage), you will need to take further action to have yourself removed. Leaving your name on the account can have risks, including negatively affecting your credit score and history if the other party fails to make payments.
Getting Divorced? Contact Our Attorneys Today.
Known for offering personalized attention and creative solutions to our clients, our firm is here and equipped to help you navigate the divorce process, including the asset and debt division process. At William Kirby Law, Family Law Attorneys, our attorney has over two decades of legal experience. If you are filing for divorce or have been served papers, you can trust our firm to help you understand your legal options and make informed decisions.
To learn more about how we can help you, contact our firm online or via telephone (215) 515-9901 today.