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Are student loans community property in a California divorce?

As you probably know, one of the main issues in a divorce is dividing up all the property legally considered to be owned in common by the couple. What many people don’t realize until they get started on a divorce is that the couple’s debts must also be divided — and these days, the type of debt most commonly held by Americans is student loans. If your spouse took out student loans during the marriage, does that mean you’ll end up having to pay off half of that debt?

It depends. California considers everything either spouse earns, anything bought with those earnings, and any debts taken on during the marriage to be “community property,” meaning it is owned by the spousal community, not the individual spouses. Legally, community property and debt are to be divided in something close to a 50/50 split, or in a way that leaves each party equally able to start over after the divorce.

Some assets and debts, however, are not community property but the separate property of one of the spouses. Degrees earned and student loans taken out before the marriage are generally attributed to the individual, so our discussion focuses on situations where one spouse took on educational debt after the couple was married.

The cost of a college or professional degree can be substantial, and many people owe tens of thousands of dollars in student debt. How that debt is handled depends on a number of factors, but the main question is who actually benefited from taking it out. For example, student loans are often used not only to pay tuition and fees, but also for living expenses. In such a case, both spouses may have benefitted from that money.

Did the degree substantially increase the earning capacity of the spouse who earned it? While the expectation of future earnings isn’t considered marital property, some courts have considered it as a factor in dividing property or when awarding alimony. For example, if one spouse put a career on hold to support the other’s educational achievements, he or she should get at least some benefit from that achievement. There is also the question of whether the degree itself could be considered community property.

Ultimately, how student debt will be divided depends on the particular circumstances and, in large part, on reasonable argument. There answer simply isn’t cut and dried.

Source: Forbes, “Are Student Loans Incurred During The Marriage Considered Marital Debt?” Jeff Landers, Dec. 17, 2013