Student Loans in Divorce Mediation

An issue that often crops up in divorce mediation is student loan debt. The mediator should encourage the parties to agree between themselves how to handle the issue. Perhaps each party keeps his/her own, or split the debt equally, or pay it off with a joint marital asset. Such an agreement, once incorporated into your written agreement, will certainly be accepted by the court when the agreement is filed.

If the parties cannot agree, the mediator must explain the analysis the court will likely employ if the case proceeds to litigation. The court will first identify what kind of debt we are talking about, i.e., marital debt or separate debt. In other words, was the debt incurred before or after the date of marriage? If the student loan debt was incurred prior to the marriage, the court will categorise that debt as separate party debt and the responsibility of the party who incurred it. If all that debt was incurred before the marriage, the court cannot arbitrarily assign responsibility for the debt to the other spouse.

It gets interesting when you delve further into the legal issues. For example, what if payments on the debt were made from joint marital funds during the marriage? Should there be some adjustment between the parties since both parties have been paying for one party’s debt? What if one spouse was generous during the marriage and paid off the other party’s student debt from his/her separate funds? Should the generous party now be allowed to recoup this generosity or will a court not want to conduct a forensic accounting of every transaction in the parties’ financial history? Frankly, these are complicated issues and a reason you want to be speaking with an experienced attorney.

If student loan debt was incurred during the marriage, the court will treat it like any other debt. That is, it will divide responsibility for the debt equally between the parties or perhaps have one party pay the student debt and the other party pay the credit card debt. In the final analysis, the court is seeking to divide debts and assets equally. Again, the issues are myriad. My approach, as always, is to advise the parties as to how the law impacts on a particular issue, and strongly encourage them to settle each and every issue between themselves. Why spend thousands on lawyers and litigate the issue when you can make a calculated assessment of your own case?

If you wish to schedule an initial consultation please contact me at 212-605-0435.