Til Debt Do You Part: What Happens When You Consolidate Student Loans and Divorce?

April 5, 2013

Student loan debt can be difficult to handle if your budget is tight and particularly if you have more than one loan. Educational debt gets doubly deep if you’ve married someone with student loans. For many years, some couples chose to consolidate student loans to get one more affordable payment instead of juggling two. But what happens when you divorce?

It’s because of this very question that as of July 1, 2006, Congress decreed that federal student loans may no longer be jointly consolidated by married couples. But some private lenders have continued to allow joint consolidation since then. Many couples who have divorced or separated are finding that the joint consolidation they took to save money is now causing complications galore.

Here are the problems:

#1 Unlike marriage, joint student loan consolidations are forever

When we stand at the altar and take our vows, we say “til death do us part.” We certainly mean it at the time, but sometimes life (or other people) get in the way and the marriage turns into happily never after. Even though you can get a divorce, you won’t get a clean break if you and your spouse took a joint student loan consolidation.

These are truly ‘til death – once together – always together. If you and your ex are both financially stable and responsible and can afford to pay your share of the consolidated loan, this may not be a problem. But if one of you is broke or irresponsible or intent on being a pain in the backside, a joint consolidation can be a painful and permanent reminder of your broken marriage.

#2 Divorce court can’t change the arrangement

Some divorce decrees have included a ruling that orders that the parties be allowed to un-consolidate student loans as part of the settlement. Turns out, divorce courts don’t have the power to break up a loan – just a marriage… Unfortunately, for those who had a pre-2006 federal loan consolidation or a private joint consolidation since, you should have read all of the fine print in your new loan contract. Joint student loan consolidation documents specify that in case of divorce, you’re still on the hook jointly for the debt – no buts, no cuts, no coconuts!

#3 You could be left on the hook for all of the debt!

If for some reason your ex doesn’t pay their fair share of the joint loan, you will quite literally pay the price. Even if there’s a great reason for your ex to not pay their portion of the debt – such as a serious disability or death – that doesn’t make it any easier on you. You will be on the hook for whatever portion they don’t pay and collectors can come after you for the shortfall. What’s more, every month that your ex pays late or doesn’t pay their portion of the debt, both of your credit records will take the hit.

Even if you pay off your share of the student loans attributed to your portion of the loans, the remaining balance will continue to haunt you. Student loans never die until you do – and if you’ve got a consolidated loan with your ex and they outlive you – your loans will live on like a ghostly specter of your college years…

Your only option if your ex isn’t paying their fair share is to take them to court. You could file suit to try and recover amounts you have paid that have gone to service their portion of the debt, or sue for damages to your credit record for their lack of payments. But if your spouse-no-more doesn’t have the money to pay their part of the debt, taking them to court may be an exercise in futility.

If you’re considering consolidating your private student loans with your spouse’s, I’d think long and hard. Nothing in life is more permanent than student loans – not death, not taxes and definitely not marriage.

If you’re juggling student loans, try Tuition.io’s free student loan tool to manage all your loans in one easy interface, check out repayment plans and even contact your lender.