Unless it would be “unjust,” or a married couple otherwise agrees in writing, California Appellate court’s have held that, a spouse’s student loans “must be assigned for payment to the spouse who obtained the education or training.” (California Family Code Section 2627) But, if the community “substantially benefited” from the spouse’s education during marriage, the loan may be divided and awarded to each spouse equally.
When has the community substantially benefited from a student spouse’s education?
That’s a tricky question to answer.
According to California’s Appellate Courts, there are two rebuttable presumptions (presumptions that may be overcome with evidence) about whether the community has substantially benefited from community contributions to the education or training, and they are:
- If the student loans were incurred less than 10 years before commencement of the proceedings for Legal Separation, divorce or the dissolution of a domestic partnership, there’s a legal presumption that the community has not benefited from the student’s education, and the student debt will be assigned to the student spouse unless the student spouse proves the community substantially benefited from the education.(Fam.C. § 2641(c)(1))
- If the student loans were incurred more than 10 years before commencement of the proceedings for Legal Separation, divorce or the dissolution of a domestic partnership, there’s a legal presumption that the community has benefited from the student’s education, and it may be “unjust” to assign the student debt unless the non-student spouse proves the community did not substantially benefited from the education. (Fam.C. § 2641(c)(1))
A judge may also conclude the community substantially benefited when the married couple enjoyed a high standard of living or accumulated substantial community assets as a result of the student spouse’s education paid by the community or outstanding student debt.
If a judge determines the community didn’t substantially benefit, a student spouse will be responsible for the unpaid student loan and may be ordered to reimburse the community for loan payments plus interest.
The right to reimbursement under California Family Code Section 2641 isn’t automatic.
A spouse seeking reimbursement must make a formal legal request and trace community funds to reimbursable expenses.
Reimbursable expenses are those directly related to a spouse’s education, including tuition, books, fees, and supplies, but do not include ordinary living expenses such as housing, food, medical care, etc.
The spouse who is seeking reimbursement must prove that the community contributions substantially enhanced the student spouse’s earning capacity, and that the community didn’t receive quid pro quo benefits before the divorce.
Proving facts necessary to establish a right of reimbursement for educational costs under California Family Code Section 2641 is usually difficult.
In simpler language, if you have student loans and prove that the community (you and your spouse during marriage) substantially benefited from your education during the marriage, the debt should be divided equally in separation and divorce.
California law and cases on point include:
California Family Code section 2641
California Family Code section 2627
California Family Code section4320(b) and (d)
In re Marriage of Lucas (1980) 27 C3d 808
In re Marriage of Watt (1989) 214 CA3d 340
In re Marriage of Rocha (1998) 68 CA4th 514
Marriage of Graham (2003) 109 CA4th 1321
Marriage of Ostler & Smith (1990) 223 CA3d 33
If you or your spouse have student loans and you would like to discuss whether they’re separate or community debt, schedule a consulting session.