When most people take on student loans, they don’t tend to factor divorce into their repayment plan. It’s hard to imagine getting divorced when you’re that you’re young and getting student loans – and harder to imagine it happening before you pay off your student loans. Could life after college be so cruel?
But like it or not, plenty of people get divorced every year while still paying back student loans. It’s an ugly reality that can lead to even uglier conflict when neither side is clear on the legalese of the situation. It’s important for anyone in this situation to bone up on just how it all works.
It can get tricky, so listen closely – here’s what happens to student loans in a divorce.
Rule: The Name On The Loan Is What Matters
The bottom line with student loan debt is: the name on the student loan is the one that matters.
Even if your ex agrees to help pay off your student loans, you need to double check that they’re making payments. Whoever has their name attached to the loan is the one who will suffer if any payments are missed. That usually means a drop in credit score.
“Let’s say you agree to some arrangement and it’s part of your divorce decree,” Accredited Investment Fiduciary Charles C. Scott said. “That’s great, but the lender doesn’t have to abide by it. You signed the loan contract so you are the one they expect the payment from – and the one they will go after if payments are late or missed altogether. It will be your credit that is impacted by this.”
There are a few general debt rules that apply to most people regardless of where they live. Any debt incurred before you got married remains your debt, unless you consolidated or refinanced with your spouse during your marriage. If both your names are on the loans, things become a bit more complicated.
Some couples refinance or consolidate their separate student loans into one during their marriage. Scott said he recommends splitting those loans up so each person is responsible for their individual loan.
“In most states, the divorcing parties can do this any way they want as long as they both agree to it,” he said.
There are some cases where both partners can become liable for student debt incurred during a marriage, even if only one person’s name is on the loan. That depends on what the judge decrees or what both parties agree to in the settlement.
Local laws vary wildly and can determine if you’re on the hook for your spouse’s student loans or not. Some of this depends on if the debt led to a larger income, enabling both parties to enjoy a higher standard of living.
Typical Scenario: Federal Student Loans
When you have Federal loans, they typically are in your name, and always stay in your name. You are always responsible for your loans.
If you get a divorce and are struggling to pay your student loans, switching to an income-based repayment plan may make sense. Here’s the caveat: when you apply for income-based repayment, the Department of Education will use your Adjusted Gross Income from your tax return, unless you opt for alternative income documentation. Since the year prior to your divorce you typically filed your taxes jointly, it could artificially inflate the amount of your student loan payment.
Another less typical scenario involves spousal consolidation. Spousal consolidation was available to borrowers in the lat 1990s and early 2000s, before Congress banned it. Some people still have spousal consolidation loans, which, like they sound, means that two spouses combined their loans. These loans are incredibly tough to deal with, because they don’t qualify for income based repayment plans or allow consolidation in most cases. The best scenario here is likely to refinance into two separate private loans for each spouse.
Typical Scenario: Private Student Loans
Private student loans are usually a bit trickier. The reason? The large majority of private loans require a cosigner. For married couples, that cosigner is typically the spouse.
So, going back to the rule we discussed above, it’s the name on the loan that matters, since the spouse cosigned, both names are on the loan and both parties are impacted. Some private student loans offer cosigner release, which could be a smart move in divorce. Otherwise, refinancing into a loan without a cosigner will likely be required, but could be tough to do.
If you’re needing a loan to refinance, we recommend Credible to compare the various loan options available. College Investor readers get a special bonus of $200 when they refinance with Credible!
What To Keep In Mind
Couples who have diverging salaries may struggle to pay off their student loans by themselves. If you’re worried about paying your bills after a divorce, decrease your payment plan or file for deferment.
Federal loans have many income-based options that can lower your monthly payments. Each private lender has their own repayment plans, but it never hurts to ask what your options are. This is especially true if you find your income bracket changing dramatically after the divorce.
The cold reality of student loan repayment may seem harsh when going through a divorce, but try not to let that keep you from making payments on time. Remember, lenders are more willing to work with you while you’re still making payments than when you’ve already missed a few.
Consult a lawyer if you aren’t sure what to do about student loans after divorce. They’ll be able to provide more specific advice and suggestions on on the legal side of things. Likewise, a financial planner can help you suss out the financial details.
If you’re not quite sure where to start or what to do, consider hiring a CFA to help you with your student loans. We recommend The Student Loan Planner to help you put together a solid financial plan for your student loan debt. Check out The Student Loan Planner here.
Photo Credit: 5second / 123RF Stock Photo
Zina is a writer, speaker, and coach that focuses on student loan debt and young adult money issues. You can learn more about Zina at Debt Free After Three.
Donna Weiss says
Back in the year 2000 I married. Consolidating your student loans was all the rage. We divorced in 2007. We still share that consolidated student loan debt and have yet to find a lender who will separate the consolidated loan into two separate loans, one in each of our names. As a result, when my credit reports is run it shows I owe the total amount of the consolidated loan. Any tips on who would separate this consolidated loan into two separate loan accounts?
Robert Farrington says
Hey Donna, Spousal Consolidation Loans are the worst.
There are many local credit unions who will split the loan if you both qualify individually. Several on our best places to refinance will do it as well, including PenFed.
Rachel Yarcusko says
What do you suggest when your ex-spouse is no longer working, and you have become the sole person making payments towards loans which aren’t yours? Oh, and your ex can’t be contacted? And why is Congress so reluctant to make it possible to sever loans which they made available 1997-2003?
Robert Farrington says
I’m assuming you’re referring to spousal consolidation loans, which are the worst loans ever created: https://thecollegeinvestor.com/20997/spousal-student-loan-consolidation/
Sadly, you have little recourse except to take the full burden on.
anonymous says
What happens if you cosigned on a loan for your spouse and have now divorced, but it was written in your divorce documents that the responsibility of the student loan debt belonged to your spouse (the borrower). Now he has stopped paying on the loan and it’s become delinquent. I was finally able to get in contact with him after 10 years and he said he stopped sending the payment because they stopped sending him an invoice. I tried contacting the loan company, but they won’t let me make any changes on the account, it’s up to him to call them and fix it. Well if he doesn’t is there anything that I can do legally, or am I responsible as the cosigner to pay the rest of the debt? I find it very ridiculous that the loan company has no problem harassing me and calling me at least 5 times a day about this, but they won’t let me do anything to fix it.
Robert Farrington says
You should speak with your lawyer about your divorce agreement being violated and seeing what your options are to handle the situation.
Nicole Keefer says
So my story is this…I couldnt qualify for any Grants when I was in school from 2006-2011 because my husband at the time, made too much money, so I was forced to use his income in order to obtain my loans to start school and pursue my degree. Well, we divorced in 2013 and now I’m stuck paying $88,000 in loans with no access to his income to help pay for this loan which was what it was all based on originally in order for me to pursue furthering my education and paying for it, so how isnt there any forgiveness programs out there to help women like me when there was and are reportedly so many Grant’s available to single moms and people with lower incomes? The best part of it all is I was forced to go onto the IBR Plan to afford the payments back when I was a single mom and now that I’m remarried, my payment went up because I went from one income to two in the Govts eyes I guess, so how is this now fair? I would love to find an atty that could help simply reduce the amount I owe to something reasonable since I’m getting screwed over on the interest since the IBR Plan was the only affordable way I can live life, take care of my kids and give them a roof over their head and afford their necessities and the interest has made my balance skyrocket! Plus, my 2 kids will soon be off to college or hopefully a trade(which I’m now pushing) because college is such a racket and I’ve gotten so screwed with the interest, but now I have to worry about their future plans with school (should they choose to want to pursue college)when I’m still managing my crazy loans.
Robert Farrington says
You can look into changing your tax filing status to lower your loan payments: https://thecollegeinvestor.com/17807/the-math-behind-married-filing-separately-for-ibr-or-paye/
Kelly Wray says
My ex talked me in to consolidating loans in the early 2000’s. He had already consolidated loans with his ex before me so his side was rather substantial. When we divorced in 2012, it was written in to the decree he was responsible for all pay back and I would pay my portion of my small amount out over next few years until my portion was paid back.
He just messaged me and said he isn’t paying the loan any more and for me to be aware. Do I have legal recourse?
Robert Farrington says
Yes, you should speak to your divorce attorney and see how you can go about getting a judgement.
Doug Ort says
I made the mistake of consolidating student loans with a spouse in the mid 90’s. We divorced in 1997 and she was supposed to pay for 1/2 the student loan debt (per the TX decree) but moved and simply vanished. I managed to locate her in 2019 but have been paying for the consolidation the entire time. I believe the statute of limitations for enforcing a decree in Tarrent County TX has past and I still have 3 years to get past this. Is there anything I can do to get her to pay for at least a portion of her nursing decree?
Robert Farrington says
You’d need to consult with your divorce attorney – it’s beyond the scope of student loan debt directly.
Eric says
Hello,
I agreed to co-sign on student loans for my wife’s son who recently started college. This occurred when we were engaged. We were married and now divorce is pending. Could someone else take over as co-signer on these loans? He is still in school and will have to take out additional loans to finish. I understand to discuss with an attorney, but do lenders typically allow switching co-signers? Thank you.
Robert Farrington says
No, you cannot switch co-signers. You would need to get a new loan (refinance them) and the new loan can have a new co-signer, and it would pay off the loan you’re attached to.