If you’re getting divorced in Maryland, a common-law state, and one of you has student loans, understanding how they are dealt with is essential. This is especially true if they were obtained while you were married.
Did one of you cosign for the student loan?
One of the key points to consider when examining student loans and divorce is if you or your spouse cosigned for the student debt. If so, both of you will be responsible for payments during and after you are divorced. The only way to get out of this obligation is to find a lender allowing just one of you to refinance the loan. However, doing so may be challenging if you lack communication and cooperation with your spouse.
Guidelines for common-law states
Getting divorced in a common-law state requires you and your spouse to take an equitable share of your marital property, which includes debt. This agreement means both of you are liable for your debts. If you’re unable to agree, a court will decide on splitting the debts. They will consider factors related to income potential, who was making payments, how the student loans were used and if a degree was obtained while you were married.
Prenuptial and postnuptial agreements may be considered
If you’re getting married and you want to solidify who pays each debt, you may want to consider using a prenuptial agreement. After you’re married, using a postnuptial agreement can specify how debts will be repaid if you divorce. When forming such an agreement, it’s crucial to be clear about the student loans being excluded as marital property.
Understanding the options available when student loans are involved in a marriage or divorce is crucial. Having this knowledge can help protect you or your partner from making a regrettable financial mistake.