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How Are Student Loans Handled During a Divorce?

by | Jul 17, 2024 | Family Law |

Divorce is a challenging experience, but the situation becomes even more complicated when student loans are involved. With 43.5 million Americans carrying some form of student loan debt, understanding how these debts are handled in a divorce is crucial for financial well-being and peace of mind. In this post, we will explore the key factors that come into play when managing student loans during a Michigan divorce and provide helpful tips for navigating this complicated process.  

Understanding Student Loans in Michigan

Michigan is an equitable distribution state, which means that all assets and debts acquired during the marriage are divided fairly between both parties in a divorce. This includes student loans taken out by either spouse during the marriage. However, it’s important to note that “fair” does not always mean equal when dividing assets and debts in a divorce.

In Michigan, any student loans taken out before the marriage will typically remain the responsibility of the individual who took them out. On the other hand, student loans obtained after marriage are considered marital debt and will be divided equitably between both parties. This includes both federal and private student loans.

Factors That Affect the Division of Student Loans

When deciding how student loans will be divided between spouses, the court will consider several factors, including:

  • The length of the marriage
  • Who benefitted from the education obtained with the student loans
  • The earning potential of each spouse
  • Each spouse’s financial contributions to the marriage
  • Prenuptial or postnuptial agreements 
  • Any other relevant circumstances

For example, suppose one party used their student loan funds to obtain a degree that significantly increased their earning potential. In that case, they may be responsible for a larger portion of that debt. Additionally, suppose one spouse was the primary breadwinner during the marriage while the other pursued higher education. In that case, they may be required to assume a larger portion of the student loan debt.

Tips for Managing Student Loans During a Divorce

  1. Gather all necessary documents: To properly divide student loan debt, both parties must provide documentation of the loans, such as promissory notes and repayment schedules.
  2. Consider refinancing or consolidation: If possible, it may be beneficial to refinance or consolidate student loans before finalizing the divorce. This can simplify the process and potentially lower monthly payments for both parties.
  3. Negotiate with your ex-spouse: Rather than leaving the decision up to the court, consider working with your ex-spouse to agree on how to divide student loan debt. This can save you time and reduce your legal costs.
  4. Consult with a lawyer and financial advisor: It’s always a good idea to seek professional legal and financial advice during a divorce, especially when dividing assets and debts. A lawyer or financial advisor can help you better comprehend the long-term implications of taking on certain debts.

Take Charge of Your Financial Future

Divorce is hard, and figuring out what to do with your student loans is even harder. Understanding how these debts are handled and exploring options for managing them can alleviate some of your stress and ensure a smoother transition into the next chapter of life.

If you’re going through a divorce and seeking legal advice, consider reaching out to the Law Offices of Michael A. Robbins. Our skilled family law attorneys will help you grasp your rights and options, empowering you to make well-informed choices about your financial future. Reach out to us today to begin your journey.