If you are considering divorce, it’s important to know that Wisconsin is what’s called a marital property state. That means all income, assets, and debts acquired during your marriage are considered marital property and will most likely be divided equally between you and your soon-to-be-ex spouse. Yes, you read that right: debts are also split equally. Examples of debts include credit card debt, medical debt, outstanding mortgage or vehicle loans, and student loan debt.

Under certain circumstances, the court may rule that income, assets, or debt should not be divided equally due to certain factors like length of marriage, the earring potential of each spouse, each spouse’s contribution to the marriage (example: unpaid childcare), tax consequences, and more. The court will carefully analyze these and other factors to determine the best way to divide all property and, yes, debt.

Divorce & Student Loan Debt

In general, any debt incurred during the duration of a marriage is considered marital debt and the responsibility for paying it off is split equally between the spouses. This includes student loan debt.

However, certain factors can make student loan debt a complex issue to settle in divorce court. Many factors must be taken into account:

• Are both spouses names on the loan or just one?
• How much is still owed?
• How did the education earned as a result of the loan impact the earning potential of the beneficiary?
• Was the loan used exclusively for tuition and books or for things that benefitted the whole family, like housing costs?
• Will both spouses have the means to pay off their portion of the debt after the divorce is settled?

Once a settlement has been reached, it’s important to update the loan paperwork to reflect who will be responsible for paying the debt moving forward. Otherwise, the loan company may still be able to call on both spouses to pay towards the debt.

Interesting fact: if one spouse earned their degree while married, the degree itself will likely be factored in as marital property and any increased earning potential acquired as a result of holding the degree used to determine a fair financial settlement.

Caveats to Consider

Student loans generally fall into one of two funding categories: private and federal. Private loans, or those distributed by a private organization, often allow one spouse to release a co-signer from responsibility. Government (or federal) loans usually do not allow this as they often do not ask for a co-signer. So, if you or your spouse hold privately-funded loans, it is possible to reach an agreement outside of divorce court if the primary borrower agrees to release the other from responsibility for the loan.

Another consideration: before 2006, married couples had the option to consolidate federal student debt from each spouse into one, jointly-held loan even if the debt was incurred before marriage. If this is the case for you and your spouse, the court will consider who is named on the consolidated loan rather than the state of each spouse’s debt prior to consolidation.

The Bottom Line

When it comes to divorce and student loans, no two situations are exactly the same. The court will take many factors into account when determining who will be responsible for the debt moving forward. However, it is important to remember that Wisconsin is a marital property state, meaning assets, income, and debt are divided equally between spouses unless extenuating circumstances make equal division inappropriate.

In our experience, here is what we’ve seen: If only one spouse is named on the loan and it is the same spouse who used the loan to access education, it is probable that they will be solely responsible for the debt on the loan. If both spouses’ names are on the loan and both have the means to make the payments, it is likely that responsibility for the debt will be split between the spouses.

The best thing you can do is hire an experienced Milwaukee divorce attorney to help guide you through this complex process. At Ohiku Law, I take the time to get to know my clients so I can make recommendations based on their unique circumstances. My ultimate goal is to make the divorce process as seamless as possible so you can get on with your life. I have extensive experience in marital property law, debt division, divorce, and family court so you can feel confident knowing your interests are protected.

Are you looking for a divorce lawyer in Milwaukee? Give Ohiku Law a call today to get started.