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Dividing student loan debt in divorce

Property division is an important aspect of the divorce process, as some of our readers know from personal experience, and it is important for couples entering marriage to understand where their potential financial vulnerabilities may lie in the event their marriage fails. Because people are marrying later nowadays, many are entering marriage not only with greater wealth, but also sometimes with significant debt. In some cases, there is significant student loan debt in the picture.

How exactly is student loan debt dealt with when it comes to property division? The answer depends on various factors, especially when that student loan debt was acquired and what state the divorce is taking place in. 

Generally speaking, student loan debt acquired prior to marriage is considered separate property and so is not put on the chopping block when it comes to dividing assets and debts in divorce. Student loan debt acquired during the marriage, though, is different. Because both spouses usually make contributions to a degree obtained during marriage and benefit from student loans in one way or another, the debt is not always considered the exclusive property of the degree-earner.

In Alaska, courts use the principle of equitable distribution when dividing marital assets and debts. Under this approach, courts take various factors into account when dividing debts, including the income earning potential of each spouses and who has custody of the children. In terms of student loan debt, there are a number of ways courts can distribute the debt depending on the circumstances. The primary rule is that the outcome is fair, given all the circumstances. This is why it is so important to have an experienced attorney at one’s side as an advocate. This ensures that one’s interests are taken into account in the decision. 

Source: The Wall Street Journal, “Who Is Responsible for the Student Loans After Divorce?,” Charlie Wells, April 13, 2014. 

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