Tennessee is an equitable distribution of property state. This means a divorce court separates all marital property and debts in what they believe to be most fair to each spouse. A court will usually award student loan debts to the party that took them out in the first place. However, sometimes, a court uses the following factors to determine if student loan debts are marital or separate property:
When the Spouse Took Out the Loan
If one spouse took out a loan before the marriage, the court will most likely determine that spouse to be solely responsible for the loan. This is because the spouse was a single student at the time and had no financial ties to their future spouse.
If the Other Spouse Benefitted from the Loan
A court may consider student loan debt the responsibility of both parties if there is proof they benefitted from the debt in some way. For example, if the use of the student loan was to pay jointly held utility or housing bills in addition to school funds, the court could consider the debt marital property. In addition, if the degree helped the student earn a large income, a court could argue that it increased the standard of living of both parties and therefore is a marital debt.
The Earning Capacity of Each Spouse
If one spouse earns much more than the other, it could affect how a post-divorce budget is divvied between the spouses. For example, if one spouse has student loan debt but can’t afford to pay it on their own, and the other has enough income to cover a majority of the payments, a court may divide the debt in such a way where the higher-earning spouse pays more of the debt.