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Will I be Responsible for my Spouse’s Student Loan Debt after We Divorce?

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If you are like many partners going through a divorce, one or both parties are bringing some form of student debt to the table. You may be wondering how that debt will be distributed between the parties, or if each person is responsible for their own debts. The responsibility of paying back the student debt of your spouse depends on multiple factors, including the state you reside in, when the debt was incurred, and whose name the debt is under. If you are getting divorced in Colorado, the parties need to be aware that Colorado is an “equitable distribution” state rather than a “community property” state. 

“Equitable distribution” means that marital property is not automatically assumed to be owned by both parties and divided equally upon divorce. Instead, marital property is divided in an equitable manner, which may not always be 50/50, but rather in a way that is fair to both parties after considering all relevant facts. The court will determine the value of all property owned by both spouses and then make its decision on the distributions of assets, debts, and marital property. This generally means that when it comes to paying back debts, the spouse whose name appears on the loan is responsible for paying it back after the divorce. Whether the debt was taken out before or after marriage generally does not change this outcome. Normally, one of the only things that would change this is whether the other spouse is a co-signer of the loan and if the co-sign of the loan survives the divorce, or whether there is a spousal agreement for the allocation of the student loans prior to divorce. However, there are exceptions that may result in you being held responsible for paying a portion of your spouse’s student loans. Specifically, if the loan was taken out during the marriage.  

The equitable division of student loans in Colorado are generally determined by looking at when the loan was taken out and by determining what the purpose of the loan was. For example, student loans incurred prior to marriage are classified as separate property and will remain separate property, unless otherwise specified in a prenuptial agreement. Therefore, you are not on the hook for paying the student loans of your ex-spouse after your divorce is finalized. This becomes more complicated with student loans that are incurred during the marriage. Student loans that are taken out solely for the purpose of covering tuition may be handled differently than student loans that also help with the cost of living and family matters for you and your spouse. The Court generally looks at student loans taken out during a marriage and student loans that benefited the marriage as marital property

Most Courts find that furthering one’s career, during the marriage, enhances their earning capacity, therefore, benefiting the marital estate. If the Court finds that the student loans benefited the whole family, regardless of whether the loan was used for living or marital expenses, or the family benefited from the degree earned, they will likely rule that it be deemed marital property and split equitably between the parties in a divorce. Since the Court has the discretion to divide marital property as it deems fit, the Court may not divide the loans equally between the parties. They may find that only a portion of the student loans be paid back by both parties. For example, the Court may find that the portion used to pay for living expenses for the family be split equally and the remainder be paid back by the spouse responsible for taking out the loan. In some cases, simply splitting the debt or allocating a specific portion to one party may not be possible. In these cases, the Courts may get creative and allocate property to one spouse to offset the student loans deemed marital property. 

The seminal case on the characterization of student loans within the marriage is In re the Marriage of Booker, 811 P.2d 405 (Colo. App. 1990). In Booker, the wife incurred $54,000 in student loans to obtain a law degree. During trial, the husband attempted to argue that because the degree was not marital property, any debt incurred should be classified as separate and solely the responsibility of the wife. The Colorado Court of Appeals found that the pursuit of higher education by one spouse is often for the common goal of both parties and both parties are expected to share in the rewards of the degree. 

Additionally, the Court of Appeals addressed the issues of student loans incurred after separation but before a final divorce decree. The Court of Appeals determined that all debts incurred prior to the final divorce decree are marital and should be treated as such, In re the Marriage of Morton, 2016 COA 1. However, courts have the discretion to treat debts equitably and allocate them as they deem appropriate. Morton found: “The determination that a student loan is marital debt, however, does not foreclose a trial court from allocating responsibility for payment of the loan entirely to the party who incurred it… A court does not abuse its discretion in finding that a student loan should be solely the incurring party’s responsibility because the party’s degree was earned later in the marriage and will primarily benefit that party.”

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