How Are Student Loans Divided by the Court in California Divorces?
Question: ” I am getting divorced in Los Angeles County. My ex wants me to take on half her student loan debt. They finished graduate school six months be fore we separated. We were married 10 years. Am I responsible for a portion of their student loan debt?”
Answer: You are not responsible for her student debt. Further, she likely owes you reimbursement for the portion of the student loan debt she paid during the marriage.
California Family Code 2641 addresses the issue of student loan debt in a California divorce. Not only is the spouse who incurred the debt responsible for the balance on separation (assuming the education benefitted the loan taker’s ability to earn), but the loan-taking spouse must reimburse the community for payments made on the loans during marriage (1/2 of which would be credited to the spouse who did not take the loans).
The reason for this apportionment is that the educated spouse will continue to get the direct benefit of the education while you do not (although you might get some indirect benefit if she pays you spousal support)
California Family Code Section 2641(b)(1) provides that upon divorce or legal separation, the community “shall be reimbursed” for its “contributions” to a spouse’s education or training that “substantially enhances” the spouse’s earning capacity. Under Family Code Section 2641(a), reimbursable community “contributions” means payments made with community or quasi-community property for a spouse’s education or training or for the repayment of a loan incurred therefore, no matter where the parties resided when the payments were made.
What if the loans were for education which occurred before marriage?
It does not matter if the spouse completed her education prior to marriage. In Marriage of Mullonkal & Kodiyamplakkil (2020) 51 CA5th 604, 607-608, 265 CR3d 285, 288, the court held that the community is entitled to reimbursement where the spouse paid off student loans for education she attained before marriage with funds from her salary earned during marriage.
In Mullonkal & Kodiyamplakkil, the trial court erroneously held § 2641 did not apply because, among other things, the student spouse (Wife) repaid her premarital education with her own earnings during the marriage, and the non-student spouse (Husband) failed to contribute to Wife’s education/loan repayments and family expenses. “[B]ut nothing in [§ 2641] contemplates denying reimbursement to the community where the student spouse pays for her own education or where the nonstudent spouse did not somehow earn an entitlement to an equal share of the community. Indeed, the statute refers to community contributions to education, and makes no reference to the source of the community contribution.” Marriage of Mullonkal & Kodiyamplakkil, supra, 51 CA5th at 615-616, 265 CR3d at 294.
Are there exceptions to this rule?
The reimbursement and assignment required by Section 2641 shall be reduced or modified to the extent circumstances render such a disposition unjust, including, but not limited to, any of the following:
(1) The community has substantially benefited from the education, training, or loan incurred for the education or training of the party. There is a rebuttable presumption, affecting the burden of proof, that the community has not substantially benefited from community contributions to the education or training made less than 10 years before the commencement of the proceeding, and that the community has substantially benefited from community contributions to the education or training made more than 10 years before the commencement of the proceeding.
(2) The education or training received by the party is offset by the education or training received by the other party for which community contributions have been made.
(3) The education or training enables the party receiving the education or training to engage in gainful employment that substantially reduces the need of the party for support that would otherwise be required.
For the first exception — where the community has substantially benefited from the education — a rebuttable presumption applies. ( § 2641, subd. (c)(1).) If community contributions to the education costs are made less than 10 years before commencement of the dissolution proceeding, it is presumed that the community has not substantially benefited. ( § 2641, subd. (c)(1).) For contributions made more than 10 years before proceedings, the opposite presumption applies.
See Mullonkal v. Kodiyamplakkil , 51 Cal.App.5th 604, 611-613