For many individuals, student loan debt is an expensive reality. The average amount of federal student loan debt is over $37,000 per borrower.
For private student loans, the debt is over $54,000 per borrower, on average. Graduate and professional students will incur even greater amounts of debt.
This means that when individuals get married, they may assume responsibility for their spouse’s debts, including their student loan debt, depending on the state. In most cases, however, the spouses will remain responsible for the loans they took out before they got married.
For example, if one spouse graduated from medical school before the wedding, the other spouse will not technically be liable for that debt. One way an individual can limit their financial responsibility is to have a nuptial agreement.
Getting married may impact many aspects of the spouses’ finances, including:
- Loan payments;
- Loan-related tax breaks; and
- The ability to pursue other financial goals.
Although one spouse will not be responsible for the other spouse’s premarital loan debt, it is still important to understand how marriage, student loans, taxes, and family law interact. Couples may be able to minimize their loan and tax obligations with careful planning and an attorney’s help.
What Are Prenuptial and Postnuptial Agreements?
Nuptial agreements, such as prenuptial and postnuptial agreements, are used to differentiate separate and marital property. Because of this, it is important to understand the basics between the two and how they affect property distribution, as this may include a spouse’s student loan debt.
Each state has laws governing the division of marital property in case of a divorce or legal separation. Most states divide marital property in one of two ways, either using the community property standard or the equitable distribution method.
In community property states, any asset or debt acquired during a marriage is considered marital property. This means that each spouse jointly owns an equal share of all the marital property.
In equitable distribution states, courts will examine several factors and variables, for example, the income of each spouse and their financial well-being, to determine how to divide the assets fairly and comprehensively. It is important to note that the emphasis is on fairness, which does not always mean equality.
In addition, depending on where the spouses reside, the state may also have divorce laws that contain provisions regarding student loan debt and the reimbursement of loan payments made by a spouse. Because of this, an individual needs to understand the marital property system in their state before they get married.
They should consult with a family law attorney if they have any questions. Nuptial agreements are agreements couples enter into to separate their specific assets and debts from their marital property.
Well-drafted nuptial agreements can exclude both debts and assets from marital property, including a spouse’s student loan debt. This means that anything properly excluded by the nuptial agreement, such as one spouse’s student loan debts, will not be calculated and divided as part of a property distribution, such as during a divorce.
As noted above, there are two types of nuptial agreements including:
- A prenuptial agreement, which is signed before getting married; and
- A postnuptial agreement, which is signed after the wedding;
- In many cases, this type of agreement is used when there is a change in one of the spouse’s financial circumstances.
Although most individuals associate nuptial agreements with very wealthy individuals and celebrities, they may benefit anyone. The number of couples using nuptial agreements is increasing, as they are viewed as an important step in an individual’s financial strategy.
How Do Prenuptial and Postnuptial Agreements Protect You from Your Spouse’s Student Loan Debt?
Technically, an individual is not financially responsible for their spouse’s premarital student loans. There are certain situations, however, in which an individual may become responsible for their spouse’s student loans, for example:
- Certain private loans do not contain death discharge provisions, which means that a widow or widower will be forced to pay for their deceased spouse’s debts; or
- In community property states, one spouse’s income may be considered marital property;
- This will allow a lender to garnish a portion of their wages to pay off the debt.
Student loans taken out after marriage may also be considered marital property, which makes both spouses equally responsible for the payments. Nuptial agreements are one way an individual can protect themselves or their spouses from these financial obligations.
A nuptial agreement protects an individual’s income and assets and can also govern premarital and marital debts. If an individual or their spouse has a significant amount of student loan debt, a prenuptial or postnuptial agreement may be able to exclude this debt from their marital property.
It is important to note that not all nuptial agreements are enforceable. For a nuptial agreement to be enforceable, it must:
- Have fair and reasonable terms;
- Be in writing and signed by both spouses;
- Be executed in front of witnesses;
- Completely disclose all assets and any debts;
- Provide specific details outlining which assets or debts are to be excluded as marital property; and
- Contain terms that are voluntarily agreed to by both parties;
- In other words, the agreement cannot be formed under duress or coercion.
It is crucial for the agreement to list any student loans that will be excluded as marital property. If the reference to the loan is too vague, it may not protect the other spouse from becoming financially liable. An individual should contact a family law attorney to ensure that the nuptial agreement is clear, enforceable, and will protect a spouse from their spouse’s debts and student loan obligations.
Do I Need a Lawyer to Help with Drafting a Prenuptial or Postnuptial Agreement?
As discussed above, every state has different rules that govern marital property, debt collection, and the enforcement of nuptial agreements. In addition, there are general principles in contract law that may apply to these types of agreements.
The agreements must properly follow all applicable rules or laws, or the nuptial agreement may not be enforceable. Because of these issues, an individual should consult with a prenup lawyer to draft or review your prenuptial or postnuptial agreement to ensure it follows the laws in your particular state’s jurisdiction and that it clearly defines all of the details that you want to include as terms.
If a dispute arises based on the agreement, your lawyer can help you negotiate a settlement or represent you in court, if necessary. When drafting an agreement, each spouse should be represented by their lawyer.
This will help guarantee that the agreement is fair, accurately represents both parties’ wishes, and that their interests are well protected.