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What happens to student loans when the marriage ends?

On Behalf of | Apr 13, 2020 | Family Law

Wisconsin residents, like many others in the country, may be carrying a high level of student loan debt. When there is a divorce, there is often the question of who is responsible for paying back these loans. In Wisconsin, people who are getting divorced must account for the fact that they could end up having to pay back their spouse’s student loans in the settlement.

Wisconsin is a community property state. This means that all assets and debts of each spouse are totaled up in order to reach the total marital estate. If one spouse took out student loans during the marriage, the other spouse will be responsible to pay back their share of that debt. If the loans were acquired before the marriage, the debts may still become part of the marital estate if mixed with assets from the marriage. There are numerous pitfalls here, so it is best to be informed before signing the divorce agreement.

Spouses may want to be proactive in addressing their student loan situation as a result. One option is to take out a consolidation loan, which could lower the interest rates and roll out the payments to make them smaller. If a person ends up in a jam because of their divorce situation, they could also ask for a period of forbearance from the lender.

Given the range of possibilities due to the laws of Wisconsin, legal help is necessary to ensure that the spouse does not end up in an untenable debt situation after the divorce. An attorney may advise on how to structure the divorce agreement to make sure that their client is not overly financially burdened. There is room to negotiate a settlement even with Wisconsin being a community property state. Student loans are an area that it would be a mistake to ignore.