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Student Loans - Breaking Up Marriages Before They Begin?

A lot has been said in the news recently about the so-called student loan debt crisis. Some commentators compare the current student loan situation to the housing bubble bust of 2008. The Washington Post now estimates that the total amount of student loan debt our country has amassed is over $1 trillion. And it’s not just a problem for college kids. The parents and grandparents that were helping to finance their relatives’ educations are now falling into delinquency on their loans at an alarming rate.

However, only recently has there been any talk about another hidden cost of the student loan debt crisis- the romantic cost. According to a recent study by NPR, the amount of loans a person may have after graduating college or grad school has become an impediment for dating and marriage. Here’s a basic scenario from the study: Boy meets Girl. Boy and Girl fall in love. Girl learns Boy is $150,000 in debt. Girl breaks up with Boy.

Is breaking up with someone over the fact that they have a lot of debt shallow and/or superficial, or merely practical in today’s unforgiving economy? Many couples are either ending their relationships or avoiding marriage because they are afraid of becoming responsible for their partner’s debts.

In North Carolina, the process by which both property and debts are divided upon separation is called “equitable distribution.” Under North Carolina’s equitable distribution statute, N.C. Gen. Stat. § 50-20, any debts that a person has going into a marriage is considered their separate property, which would include any student loan debt taken out before marriage. The statute defines separate property as “all real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage.”

So technically, if your spouse takes out $100,000 in student loans before you got married, that means those loans are their separate property and you won’t be responsible for them, right? Technically yes, but practically, probably not. If you have any type of joint account with your spouse while you are married, chances are, a portion of that has probably gone to paying down the balance on those loans. On the other hand, if you or your spouse take out loans during your marriage for some joint marital purpose, then upon separation, those loans would be considered marital debt and subject to division under equitable distribution.

Relationships can be stressful enough without the added weight of someone else’s student loans. However, there are ways of dealing with these issues in a way that could protect your assets during and after marriage. You could get a Prenuptial Agreement before you get married, which could ensure that each person’s debts remain separate in the event of separation or divorce. Or, if you do happen to separate, you and your spouse could enter into a Separation Agreement and agree to keep your debts separate.

It will be interesting to watch how the student loan debate plays out, especially because it has wide-reaching ramifications for millions of Americans.

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