Overview

Student loans commonly appear on the balance-sheet of a divorce. How they are split depends on three things: (1) whether the debt was incurred before or during the marriage, (2) whether the loan is federal or private, and (3) your state’s property laws (community property vs. equitable distribution). Importantly, a divorce decree can assign payment responsibility, but it cannot change the underlying loan contract or remove legal liability from the named borrower or cosigner — that requires the lender’s agreement or a refinance.

Federal vs. Private Loans (what really matters)

State Law: Community Property vs. Equitable Distribution

  • Community property states generally treat debts incurred during marriage as jointly owned and split 50/50. Equitable-distribution states divide marital debt fairly, which may not be equal and often considers factors like income, who benefited from the education, and the length of the marriage.

  • Because state rules vary, courts often combine legal analysis with negotiation. Always confirm your state’s approach with a family law attorney or local court resources (Consumer Financial Protection Bureau provides general guidance: https://www.consumerfinance.gov).

Practical Steps to Protect Yourself

  1. Inventory every loan. Note the date borrowed, account holder(s), and whether a cosigner exists. Documentation matters in negotiations and court.
  2. Identify what’s marital vs. separate. Loans taken before marriage are often separate; loans taken during marriage may be marital — but trace the funds and benefits (did both spouses benefit financially?).
  3. Negotiate clear language in the divorce decree. If you agree a spouse will pay a loan, include remedies (e.g., hold harmless clauses, indemnification, or liquidated damages) and require notification of default.
  4. If you need to remove legal liability, pursue a refinance or cosigner release with the lender after divorce. For federal loans, consolidation under a spouse’s name (or applying for Income-Driven Repayment) may help but requires the borrower’s cooperation.
  5. Protect credit and income: Monitor credit reports, set up autopay, and keep servicers informed of address and contact changes.

Common Mistakes and Misconceptions

  • Relying only on the divorce decree: A court order does not change the loan contract. The lender can still collect from the legal borrower or cosigner.
  • Thinking divorce erases joint credit impacts: Even if the decree assigns a loan to one spouse, missed payments will appear on credit reports and can be used in collections against the named borrower/cosigner.
  • Ignoring government collections: Defaulted federal loans can lead to tax refund offsets and administrative wage garnishment (see federal student-aid resources: https://studentaid.gov).

Real-World Example (typical scenarios)

  • One spouse took graduate student loans during a 10-year marriage and the degree increased household income. In equitable-distribution states, a judge might split responsibility because both spouses benefited indirectly.
  • A spouse has a Parent PLUS loan signed before marriage. The loan often stays that spouse’s separate obligation unless marital funds were used to pay it or state law treats it differently.

When to Get Professional Help

  • Consult a family law attorney for drafting enforceable language and understanding state-specific rules.
  • Talk to a loan servicer about options for federal loans and to private lenders about refinancing or cosigner release.
  • For tax questions (for example, whether discharge or forgiveness has tax consequences), consult a tax professional. Note: the American Rescue Plan made certain federal loan forgiveness tax-free through 2025 for federal tax purposes; check current IRS guidance for updates: https://www.irs.gov/newsroom/american-rescue-plan-act-provisions.

In my practice, I’ve seen negotiated divorce agreements that protect the non-borrowing spouse’s credit and financial future by including repayment schedules, escrow accounts for payments, and explicit indemnity clauses — and I advise clients to document every step and keep communication channels open with servicers.

Key takeaways

  • A court can assign who should pay, but lenders collect from the person on the loan. Refinancing or cosigner release is usually required to remove legal liability.
  • Federal loans carry unique collection tools; private loans may allow more flexibility through lender agreements.
  • Always put repayment terms in writing in the divorce decree and consult legal and tax professionals.

Resources

Professional disclaimer

This article is educational and not legal advice. For guidance tailored to your facts, consult a family law attorney, loan servicer, or tax advisor.