Student loans – how are they handled upon divorce?
Student loans incurred prior to marriage:
In Texas, student loan debt incurred by one spouse is generally considered that spouse’s separate property and is not subject to division upon divorce. This means the debt remains the responsibility of the spouse who incurred it. Courts apply this standard in practice, and generally hold that student loans acquired by one spouse before marriage are considered that spouse’s separate debt and cannot be assigned to the other spouse upon divorce. Court treatment of student loans incurred prior to marriage aligns with the law regarding marital property division, which treats premarital debt as separate property that cannot be allocated to the non-acquiring spouse when dividing marital property during divorce. Therefore, if your student loan debt was incurred before marriage, it will likely remain your responsibility after the divorce, and the court will not divide it between you and your spouse.
Student loans incurred during the marriage:
Student loan debt incurred during marriage is generally treated as community debt. This means that it is presumed to be a joint obligation of both spouses. This presumption can be rebutted with clear and convincing evidence that the lender agreed to look solely to the separate estate of the borrowing spouse for repayment. That means that in order to rebut the presumption of the student loans being community debt, there must be proof of an express agreement between the incurring spouse and the lender which indicates the lender was to look solely to the separate estate of the borrowing spouse to repay the debt.
However, even if you are unable to successfully rebut the presumption of the student loans being community property, that does not necessarily mean the debt will be divided 50/50 between you and your spouse. The Texas Family Code grants the trial court wide discretion to divide community property in a manner it deems just and right, rather than mandating an equal division. This means that even though student loan debt incurred during marriage is presumed to be community debt, the court may allocate the debt between the spouses in a way that it considers fair based on the circumstances of the case.
Student loans incurred prior to marriage but paid back during the marriage with community funds:
Generally, a spouse in Texas can seek reimbursement in a divorce when one marital estate has used its property to confer a benefit on another marital estate. For example, if the community estate pays money toward the separate estate of one spouse, the community estate can seek reimbursement if the payments benefitted the separate estate. The basis of this principle is that such payments will result in unjust enrichment if not repaid. However, there are exceptions to this rule. The Texas Family Code makes it clear that a marital estate cannot claim reimbursement for a student loan owed by a spouse. This statutory provision explicitly excludes student loans from the types of expenditures that can give rise to a reimbursement claim. Therefore, a spouse cannot get reimbursed for community funds paid toward the other spouse’s student loans during marriage, even if those loans constitute that spouse’s separate property. Thus, if you have contributed community funds to your spouse’s student loans during the marriage, you will not be successful if you seek a reimbursement claim for such payments.
Need help with your divorce case?
Find a trusted attorney that is experienced in family law matters and can help you navigate property issues that arise in your divorce. The attorneys at Grinke Stewart Family Law are here to help you. Contact us at (469) 598-2001.
