Everyone knows that you split the assets in a divorce but people rarely consider that you also have to split up the debts. Usually debts are associated with an asset like a house and a car so whoever keeps the asset, keeps the debt. When it comes to student loans, however, there is no physical asset. So, who is responsible for the student loans in an Illinois divorce?
Is The Student Loan Debt Non-Marital?
All debt that a divorcing person holds in their name or in the other spouse’s name is either “marital” or “non-marital”
It’s a little confusing but the Illinois statute defines marital debt as “marital property”
“”marital property” means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage” 750 ILCS 503(a)
The Illinois statute goes on to clarify what marital property is.
“For purposes of distribution of property, all property acquired by either spouse after the marriage and before a judgment of dissolution of marriage or declaration of invalidity of marriage is presumed marital property.” 750 ILCS 5/503(b)
An Illinois divorce court must qualify each kind of property or debt as either being marital or non-marital.
“The court shall make specific factual findings as to its classification of assets as marital or non-marital property, values, and other factual findings supporting its property award.” 750 ILCS 5/503(a)
The non-marital debt stays with the person who’s name that debt is in.
“[T]he court shall assign each spouse’s non-marital property to that spouse.” 750 ILCS 5/503(d)
Realistically, most student loan debt is incurred when the parties are college age and not married to each other. So, non-marital student loan debt MUST stay with the party that incurred that student loan debt.
How To Divide Marital Student Loan Debt In An Illinois Divorce?
If the student loan debt was incurred during the marriage then it may be distributed by the court.
An Illinois divorce court “shall divide the marital property without regard to marital misconduct in just proportions considering all relevant factors.” 750 ILCS 5/503(d)
So, you can see there is no 50/50 division rule in Illinois. Illinois is classified as an “equitable distribution” state. Meaning that judges distribute property and debts between a divorcing couple as that Illinois divorce judge believes is fair. Usually, an Illinois divorce judge will lean towards dividing assets and debts 50/50. If you want a judge to NOT divide a student loan debt 50/50 you need to point to the statute.
Making the Student Loan Borrower Be Responsible For Their Student Loan In An Illinois Divorce.
“[E]ach party’s contribution to the acquisition, preservation, or increase or decrease in value of the marital or non-marital property” 750 ILCS 5/503(d)(1)
This is pretty straightforward, the student loan borrower is the one who contributed towards the debt, therefore they should keep that student loan debt.
“[T]he value of the property assigned to each spouse” 750 ILCS 5/503(d)(2)
This clause allows you to point out that the spouse essentially purchased the degree that they have with their student loan. That spouse believed the student loan was a fair price for the degree. Therefore, the degree has value and the student loan is at least worth the value of the degree.
“[P]rofessional licenses and scholastic degrees do not constitute a property interest subject to division as a marital asset” but the loans associated with those licenses and degrees can be subject to division and therefore those obligations should remain with the license or degree holder. In re Marriage of Thornley, 838 NE 2d 981 – Ill: Appellate Court, 4th Dist. 2005
This sounds like a stretch but many divorce judges in Cook County have explained this exact logic to me when allocating student loan debt to the borrower.
“[T]he relevant economic circumstances of each spouse when the division of property is to become effective, including the desirability of awarding the family home, or the right to live therein for reasonable periods, to the spouse having the primary residence of the children” 750 ILCS 5/503(d)(5)
Using a similar logic, you can propose that the spouse who incurred the student loan now has a higher income and, therefore, can afford the future responsibility for the student loan.
“[T]he age, health, station, occupation, amount and sources of income, vocational skills, employability, estate, liabilities, and needs of each of the parties” 750 ILCS 5/503(8)
This portion of the statute literally mentions “occupation, amount and source of income, vocational skills, [and] employability.” These all stem from and can contribute to the student loan.
“[T]he reasonable opportunity of each spouse for future acquisition of capital assets and income” 750 ILCS 5/503(d)(13)
Again, the spouse will be acquiring assets in the future because of the student loan so shouldn’t that same spouse be responsible for the student loan?
The court has the right to allocate 100% of a debt to one particular party. “Where one party is substantially responsible for the creation of the debt and has a substantially greater capacity to earn money, it is not an abuse of discretion for the trial court to assign the overwhelming majority of debt to that party.” In re Marriage of Werries, 247 Ill. App. 3d 639, 649-51 (1993)
In conclusion, take the case of the dutiful wife who put her husband through medical school. She should not be expected to be responsible for her husband’s student loans and she should expect to get an additional portion of the marital estate based on her sacrifices and his gains from those sacrifices based on the statutes I listed above.
Splitting Up The Responsibility For A Student Loan
In the alternative, if you are the student loan borrower and want your spouse to be responsible for part of the student loan, you can use the same reasons to ask the judge for them to contribute to your student loan.
The non-borrowing spouse knew you were taking out the student loan and consented to it. The non-borrowing student loan. The non-borrowing spouse knew they could afford the student loan as a couple.
Some student loans simply don’t have a big return on investment. A Masters In Social Work may not pay much…and your spouse knew that when the loan was taken out.
Finally, you can argue different debts should not be treated differently. That’s fundamentally unfair. Each party should contribute to ALL marital debts.
What If The Student Loan Was Refinanced During The Marriage?
Typically, student loans have very low interest rates as they subsidized by the government. Student loans were rarely, if ever refinanced or consolidated in the past.
With interest rates hitting zero and companies like SoFi, student loans can be refinanced…especially when the non-borrowing spouse’s income can now be accounted for in the new refinance.
Refinancing in both parties’ names usually turns non-marital property into marital property under Illinois law.
“If marital and non-marital property are commingled into newly acquired property resulting in a loss of identity of the contributing estates, the commingled property shall be deemed transmuted to marital property” 750 ILCS 5/503(a)(5)(b)
At this point, the non-borrowing spouse become a co-borrowing spouse and will definitely be responsible for part of the student loan.
When student loans…or any debt for that matter become marital, then marital assets should be sold to satisfy the marital debt so you are no longer entangled with your ex-spouse.
“The court may make such judgments affecting the marital property as may be just and may enforce such judgments by ordering a sale of marital property, with proceeds therefrom to be applied as determined by the court.” 750 ILCS 503(i)
If you’d like to discuss what will happen with your student loan debt or your spouse’s student loan debt in your Illinois divorce, contact my Chicago, Illinois family law firm and schedule a free consultation with an experienced Chicago divorce lawyer.