I’m Not Paying My Ex’s Student Loans – Or Am I?

Im Not Paying My Exs Student Loans – Or Am I

Angela Powell was a college freshman with big dreams when she met the man who would one day become her husband. They were married after graduating, and both continued their education. Her husband began law school, while she went to business school to earn her MBA.

The Department of Education had recently rolled out the Joint Consolidation Loan Program for married couples to consolidate their student loans, offering one monthly payment to keep up with and a lower interest rate. The program was fleeting, ending in 2006, but not before enrolling more than 14,000 borrowers.

They settled down in Arizona, and the marriage marched into tough terrain. The relationship felt the strain of 2009/2010’s housing market crisis. Jobs were lost. Marital bliss waned.

Then came the divorce. Their connection continued to erode, and despite her ex-husband being responsible for the bulk of their student-loan debt, he stopped making regular payments. And now, Powell is burdened with payments on an almost $200,000 obligation. This is five times more than her initial loan—a monthly payment of almost $2,000.

The unforeseen complications of this program arise when the individual loans need to be disentangled, resetting the debt to the original borrowers of each loan, because of divorce, separation, or domestic violence. 

A Possible Solution

In 2021, the Joint Consolidation Loan Separation (JCLs) Act was introduced. In the case of divorce or domestic abuse, this bill allows for loans to be proportionately divided between responsible parties according to the amount originally borrowed. 

Since the bill’s conception in 2017, legislatures have heard horror stories about spouses fleeing an abusive ex but still forced to pay the ex’s student loans. The bill tries to resolve one cause of financial spousal abuse. This happens when one spouse refuses to repay loans, attempting to sabotage the other spouse’s credit. 

Research from the National Network to End Domestic Violence (NNEDV) indicates that some sort of financial abuse is present in 99% of domestic abuse cases. Often, survivors of abuse stay in toxic relationships for fear of financial instability.

In amicable separations, family courts may draw up agreements to ensure both spouses make payments on loans. But if the loans are consolidated and one of the spouses is eligible for Public Service Loan Forgiveness, consolidation bars them from the forgiveness process and a chance to erase some debt.

JCLs will work to equalize the playing field for outstanding debt, which currently amounts to an estimated $1.7 trillion from more than 43 million federal student loan borrowers. One in eight Americans have student loan debt. Recent graduates, ages 25-34, make up the majority of this debt, but more than $600 billion belongs to individuals aged 35 to 49, also the most prevalent age range for divorces.

With this financial peril, it seems unfair to complicate borrowing terms in a model that is not sustainable, unfairly weighing down divorcees with a consolidated financial burden as they try to establish a new life outside the marriage. 

In June, JCLs passed the Senate, but it faces an uphill battle as it heads into the House.

Student Loans and Divorce

Typically, how student loans are handled during divorces comes down to location. States manage a divorce’s division of property and debt in one of two ways:

  1. Equitable distribution state – Both spouses can come to an agreement, or a court can decide on how to divide property equitably, not equally, between the parties. Sometimes, an equal division of property will occur, but usually, the court determines fair outcomes by weighing certain factors like individual earnings, wealth or property accrued during the marriage, and assets held before the marriage. 
  2. Community property state – In a community property state, all earned income, savings, assets, benefits, inheritance, or any property bought with communal income are subject to a 50/50 split, despite who earned more or acquired more during the marriage. Community property includes communal debt that is subtracted from the total before the division between spouses. 

Most states resolve the division of property through equitable distribution. If loans are not consolidated, a court may examine the couple’s financial situation and payment history and make an equitable decision, including who should repay student loans.

California is among nine community property states in the United States where spouses share the wealth and the debt equally. Even if the debt comes primarily from one spouse, each spouse is responsible for 50% of the debt accrued during the marriage.

Other Issues to Consider

Those stuck in a Joint Consolidation Loan may have to hang in limbo a bit longer, but there are moves to be made in other situations.

Getting divorced does not wipe away a co-signer’s signature. That signature ensures the legal responsibility to ensure payment still exists, even when the marriage does not. A co-signer release request may be an option, but it is not an easy route for lenders and exes to release an extra party on the hook for repayment. 

If a spouse co-signs a loan, a prenup is no help. Co-signing admits the acceptance of community debt. But a prenuptial agreement can supersede the rules of a community property state, if the agreement asserts that a spouse’s individual debt, like a student loan, is their sole reliability to repay. 

Someone can dispute a prenup by claiming:

  • Their signature was coerced 
  • They were not represented legally

In some circumstances, divorces may reduce a loan’s monthly payment. If payments are adjusted to a couple’s joint income, a divorce will reduce that to individual income. In turn, monthly payments may be revised or become income contingent. 

The dissolution of a marriage will not change the structure of a loan contract. If agreements were made where one spouse repays the other spouse’s student loans in lieu of alimony, the original loan conditions do not change. If payments are missed, lenders come after primary borrowers, not the delinquent spouse. 

Original borrowers should always monitor their accounts to ensure payments are made and take legal action against their ex-spouse if they breach the terms of their agreement.

The most crucial factor is to make payments on time, if possible. A divorce can be hard enough without being followed by the dark clouds of poor credit scores or defaulted loans. 

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