Many individuals enter marriages with more debt than assets, and student loans in particular can be the most significant entry on a young person’s financial ledger. During the marriage, the student loan will be paid down or perhaps even entirely off with funds earned during the marriage – marital property. Sometimes, the student loan is taken during the marriage, and its proceeds might be used to pay tuition exclusively, or they might include funds for day-to-day living expenses.
One thing is clear: student loans are not income for purposes of support. In 2007, in the case of Didio v. Didio, Virginia’s Court of Appeals reversed a trial court’s decision to count a student loan as the husband’s income for purposes of figuring out support. Debts are considered in the division of assets and liabilities.
This observation, however, does not control whether the debts are considered separate or marital, and even if they are marital, whether the spouse who did not benefit directly from the education ought to be considered responsible for some of the loan repayment.
As recently as a2018 case, Scheer v. Scheer, the Court of Appeals restated that equitable distribution permits the apportionment of marital student loans. That case was complicated by the failure of the trial court to make a finding as to the balance of the loans when the party separated, but that does not change the proposition that the court may consider the student loans in equitable distribution of property. Previous cases had stood for the same proposition.
Anecdotally, however, a review of the cases indicates that while other assets and debts classified as marital are often divided equally, student loans seem not to be.
Virginia’s courts do not offer any definite guidance on the treatment of student loans. The advocacy of the attorneys and the specific facts of the case will make a difference. The key concerns relating to student loans, things to think about in preparing the case, include:
– Only one party can retain the benefit of the education, and that party will release more (or all) of the economic benefit of the education.
– Some of the loan may have been for living expenses that inured to the use and benefit of both parties.
– The payments on the student loans during the marriage will have diverted funds that might otherwise have been savings or other assets, reducing the overall marital estate.
When dealing with a student loan issue, therefore, having good records showing when the loans were taken, how the loans were used, how much of the loans were repaid during the marriage, and the balances remaining will be necessary to let the lawyer develop the most effective arguments for the particular situation.