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Understanding Student Loans & the Debt Distribution Process

Nearly 45 million people in America are frantically struggling to pay off their student loan debts. Statistically, this means that at least 24% of the country is currently participating in a college debt repayment plan. With citizens collectively owing over $1.5 trillion, it’s no wonder that many desperate people just give up and allow these debts to default. But what happens to a spouse’s student loans when a couple files for divorce?

The Equitable Distribution of Debt

Iowa is an “equitable distribution state,” which means that debt is divided fairly, if not equally, in a divorce. Before this legal process can be finalized, spouses need to divide their marital assets and debts to guarantee that both parties walk away with an equitable share of the marital estate.

Any debts accrued during a marriage are part of a couple’s distributable marital estate. However, this isn’t necessarily the case when it comes to student loans. The court needs to evaluate several factors before deciding if both spouses are responsible for paying this debt.

The court may consider the following actors to make a final determination:

  1. Was the debt accrued during the marriage?
  2. Who benefitted from the student loans?
  3. What was the duration of the marriage?
  4. What was the loan money used for?
  5. What is the earning ability of both spouses?
  6. Is there a prenuptial agreement or any other pre-existing legal agreements to consider?

For example, if the student loan was used to pay for tuition and other school-related expenses, the court may decide that the spouse who originally applied for the loan is solely responsible for paying it off. However, if the loan was used to pay for housing costs and living expenses, then the burden could be shared between both spouses. Of course, any student loan debt incurred before the marriage is considered separate property and not part of the marital estate.

Secure a Beneficial Divorce Settlement

Unfortunately, it’s impossible for Iowa courts to be consistent in their rulings. Every couple that files for divorce has their own personal circumstances and financial situations that need to be considered. The only way to secure a beneficial divorce settlement is to hire a skilled attorney who can negotiate and litigate on your behalf. At The Law Offices of Mark R. Hinshaw, our West Des Moines Divorce Lawyers can help you fight for a settlement that meets your personal and legal objectives.

Contact The Law Offices of Mark R. Hinshaw at (515) 200-7571 if you have any concerns about how student loans can impact your divorce. We can guide you through each step of the divorce process.

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