Student Loans

Marriage and Student Loan Debt: The Basics

There are two primary ways to assume the student loan debt of a spouse or domestic partner. These are to be married to a partner in a community property state when the partner takes out a student loan or sign an agreement to repay a student loan for a partner.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states. In these states, when one partner takes out a student loan during the course of the marriage, the other partner is liable for their debt. Texas law further provides that if one partner acts as an agent for the other, the partner who acted as an agent is liable for the other party’s debt.

In both community property and common law (non-community property) states, creditors can reach a married couple’s joint assets. The difference between the two types of states is the extent to which a creditor can seize these assets. In community property states, a creditor can recover 100% of a joint asset. In common law states, a creditor typically is able to recover only 50% of a joint asset. This is the ownership interest of the partner who directly assumed the debt. Both joint bank accounts and items of personal property, such as a boat, are considered joint assets. In community property states, a creditor can recover 100% of an item of personal property even if only one partner’s name is recorded on the item’s title. A married couple can prevent the seizure of certain assets through a pre-nuptial agreement. The agreement should state that when the marriage takes effect, certain assets which were separate property before the marriage will remain separate property.

Generally, state laws require that an agreement to repay a student loan for another person must be in writing. Many spouses who do not have an obligation to repay their partner’s debt do so in order to provide their partner with a benefit, such as a lower interest rate. The act of cosigning or signing as a surety on a student loan usually creates an obligation where none existed before. Sometimes, lenders send documents to a non-debtor spouse that make it appear as if that individual has an obligation to repay the loan. If you have received such documents, talk to a collections attorney or financial counselor before sending payments or signing any paperwork.

One type of agreement that confuses many married couples is a consolidation agreement. When a non-debtor spouse cosigns or signs as a surety on a consolidation agreement, they can become liable for the entire amount of loans that have been consolidated. Even when a lender commits fraud by providing the non-debtor spouse with misleading or fraudulent documents, consolidation agreements can be tricky to undo. Accounting arrangements for consolidated loans tend to be extremely complex.

Read the laws of your state to determine your potential and existing obligations for your partner’s student loan debt. The information you uncover may help you avoid unknowingly shouldering a greater burden.