Are Student Loans Part of Marital Debt in a South Carolina Divorce?

The divorce lawyers at Futeral & Nelson often handle cases where one or both parties have student loans. In these cases, we have to argue whether one party should contribute to the student loans of the other. While there is no case law directly on point, the general law and common sense provide some guidance.

Are Student Loans a Marital Debt in a South Carolina Divorce?

The answer to whether someone has to pay his or her spouse’s student debt is: “maybe.” If a case involving student loans went to trial, the family court judge would have to first determine whether the loan is a marital debt. In general, if a spouse incurred the debt prior to the marriage, it is a non-marital debt for which the other spouse will not be responsible. However, if the parties get married while one is in college or grad school so that some of the loan proceeds were disbursed prior to the marriage, while the rest was disbursed during the marriage, a family court judge might divide the post-marital loans. Lastly, if the spouse incurred the debt during the marriage, the judge will find it is a marital debt that needs to be divided. This does not necessarily mean it will be 50/50 as we will explain below.

How Does the Family Court Divide Student Loan Debt in a South Carolina Divorce?

This is an interesting question in that it is the only aspect of a divorce case that requires this analysis. If you have gotten this far, then we will assume for this discussion that the debt was acquired during the marriage and is marital. Some questions you will need to be prepared to answer for your attorney are:

What were the loan proceeds spent on? If the loan proceeds were spent on living expenses or to acquire marital assets, this would more favor splitting the loan 50/50. If the loan proceeds were spent on tuition, then it opens the door for arguments that the spouse who received the education should be responsible for all or most of the debt.

To what extent did the college or post-graduate degree benefit both parties? If the parties divorced shortly after the college or graduate degree was obtained and the student loan paid for tuition, then it may not be fair to put any of the student loan on the spouse who did not receive the degree because that spouse will never really receive any benefit from the degree. However, if it was a long marriage, and the spouse who did not receive the degree benefited from the other’s job and income for all of those years, a court could easily split the student loan 50/50.

Is the party with the student loan paying alimony? If the party who obtained the degree is liable for alimony under the law, then we believe it is only fair that the spouse receiving alimony share in the responsibility for the student debt.

Do both parties have student loans? If both parties have student loans, then it is not necessarily a “you take your debt and I’ll take mine” situation. We need to perform all of the above analyses on each debt individually.

Did the party whose name the loan is in actually get a degree? Let’s say for example that a spouse started a college program but dropped out for a valid reason, such as having a child or taking a good job. Because that party has no real ongoing benefit from the partial education and because decisions were made in the best interest of the marriage, a judge could easily split this debt at or near 50/50.

Will the judge transfer the debt to the other spouse? So if a judge or settlement makes one spouse responsible for the other’s student loan, here is an example of how it will work: Wife has $30,000 in student debt with ABC Loan Company. Pursuant to the final order or agreement, Husband is to be responsible for 1/3 or $10,000 of that amount. The debt will NOT be split so that Wife’s loan is reduced to $20,000 and Husband will now have a loan of $10,000 with ABC Loan Company. Either Husband will owe Wife $10,000 in cash, either lump sum or payments, OR Husband’s $10,000 obligation will be used to offset other assets and debts when dividing the marital estate.

What Other Things Does the Court Consider When Dividing a Student Loan in a South Carolina Divorce?

While much of this article discusses factors that are specific to student loans, everything should be looked at as a big picture. Please review our article on the division of marital estates in South Carolina. Marital fault, custody consideration, discrepancies in income, and numerous other factors may alter the general answers given in this article. If you have questions about how your student loan will be handled in a divorce, call the lawyers at Futeral and Nelson to set up a consultation and we can go over your entire situation with you.