Marriage, Divorce, and Law School Loan Debt

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By Justine Borer, Esq.

According to the U.S. News and World Report, the overwhelming majority of United States law students who graduated from law school in 2018 had significant student loan debt. The American Bar Association has accredited 203 schools that confer the Juris Doctor degree. Of those 203, 186 law schools were analyzed by the U.S. News and World Report. At only 2 (University of Detroit Mercy and University of North Dakota) did fewer than half of the 2018 graduating class have student loan debt. At another 2 schools (Southern University Law Center and Florida A&M University), 100% of students graduated with student loan debt. At 108 of the schools analyzed, 75% or more students graduated with student loan debt. The lowest average student loan debt for students incurring such debt was at Georgia State University with 72% of graduates incurring an average of $50,902.

The picture of student loan debt is staggering at New York Law Schools.

● New York University: 59% graduate with debt averaging $167,441;
● Columbia University: 67% graduate with debt averaging $163,736;
● Fordham University: 59% graduate with debt averaging $146,217;
● New York Law School: 76% graduate with debt averaging $142,715;
● Cornell University: 66% graduate with debt averaging $128,757;
● Albany Law School: 83% graduate with debt averaging $100,386;
● Brooklyn Law School: 81% graduate with debt averaging $116,352;
● Yeshiva University (Cardozo): 62% graduate with debt averaging $116,066;
● Syracuse University: 79% graduate with debt averaging $114,523;
● University of Buffalo-SUNY: 77% graduate with debt averaging $88.867;
● CUNY Law School: 63% graduate with debt averaging $68,355;

Myriad issues could be discussed within this context, such as the sheer amount of the average loans taken out by students at most law schools and the pressure placed on law graduates to quickly find jobs which will allow them to chip away at the loans. This article will approach the law student loan debt conundrum from a different angle by trying to understand the impact of law student loan debt on marriage and divorce.

According to data from the United States Census Bureau, the median age at first marriage in the United States in 2018 was between 27 and 28 for women and between 29 and 30 for men. According to data from the Population Reference Bureau, the median age at first marriage in New York from 2013-2017 was 29.6 for men and 27.7 for women. Although I was unable to locate reliable data about the median age of United States law students taken as an aggregate, or by gender, at Cornell Law School, for example, the average age of students in the entering class was 24, meaning that the average age of students at graduation was approximately 27. Similarly, though I was unable to locate reliable data about the median age of marriage for law students, law graduates, or lawyers as a group, it is reasonable to assume that the average American law student will graduate from law school, saddled with significant student loan debt, in a period that is quite close in time to the median age at which people marry in the United States.

Entering marriages with student loan debt is nothing new. But in prior decades, the average annual tuition was significantly lower. For example, according to the American Bar Association Statistics Archives, in 1985, the average annual tuition was $2,006 for public law school resident students, $4,724 for public law school non-resident students, and $7,526 for private law school students. By way of comparison, in 2013, the most recent year for which I was able to locate data from the American Bar Association Statistics Archives, the average annual tuition was $23,879 for public law school resident students, $36,859 for public law school non-resident students, and $41,985 for private law school students. According to usinflationcalculator.com, even accounting for inflation, annual tuition was significantly higher in 2013 than in 1985. As a result, concerns about paying back law school loan debt - assuming that debt was undertaken at all - were more modulated 30 years ago than they are now. Today, the sheer amount of student loan debt a spouse may have incurred in law school may cause confusion and anxiety for the non-debtor spouse.

One of the most important practical steps one can take to guard against problems with a spouse's student loan debt is to ensure that all loan payments are made on time. Auto-debit for student loan payments is an option, and it has some clear advantages, such as convenience and protection against late payment fees and negative notations on credit reports. But auto-debit can be very problematic if there's an error, especially one that results in a missed payment. (See Adam Minsky, Student Loan Debt 101, 2014).

And in fact, there are several practical ways to minimize the potential impact of a spouse's student loan debt:

● Be familiar with the specifics of the loan: whether it is private or federal, and what its terms are. Find out right off the bat the options if a spouse defaults on the loan. (See Student Loan Debt 101).
● Make informed financial planning decisions in the context of the loan terms (e.g., is it financially feasible to buy a home in the years immediately after a spouse graduates from school, given his or her income, the amount of his or her monthly student loan payments, and the potential impact of the debt on home mortgage terms?) Shiva Bhaskar, an attorney focusing on consumer credit issues, explains that "[mortgage] lenders care a lot about debt to income ratios, when deciding how much to approve someone for. A couple [in which] one spouse has lots of student loan debt will definitely be able to borrow less."
● Consult an accountant or financial planner to decide whether it makes sense to file taxes separately (though in the case of certain loans, such as federal REPAYE loans, that won't make a difference). (See Student Loan Debt 101)
● If the marriage occurs after the debt has been incurred, consider executing a prenuptial agreement which indicates how much the debtor spouse will be responsible for and how much the couple will jointly be responsible for.
● If there is a divorce, make sure there is language in the separation agreement spelling out how much of the debt the debtor spouse will be responsible for and how much the couple will jointly be responsible for.

Student loan debt is a component of the entire picture of a marital financial situation. At divorce, it may be a factor considered in equitable distribution. So even if the student loan debt was taken out before marriage by one spouse, it may be a factor in deciding how money and property will be divided at divorce. And if student loan debt is taken out after marriage, though it may not impact the non-debtor spouses' credit score, it is considered marital debt even if the non-debtor spouse doesn't co-sign the loan. Conversely, if the spouses marry before or during law school, the contributions the non-debtor spouse made towards supporting the couple while the debtor spouse was in school may be a factor in equitable distribution.

If a spouse defaults on his or her payments, the student loan status is "delinquent." A host of other issues present. For one, there is "no statute of limitations on collection of federal student loans...[so] the government can pursue you for the rest of your life." Student Loan Debt 101. Mr. Bhaskar explains that the federal government can "garnish wages and freeze bank accounts on defaulted loans, without a court order, so this has an impact as well (i.e. total income reduced, and joint bank account in some cases could be accessed, which means total savings are reduced)." Private lenders are more limited in how they can pursue the debtor spouse without a court order, but with a court order, they may still be able to garnish wages, seize bank accounts, and put liens on properties. (See Student Loan Debt 101).

Though it need not, the federal government has the authority to sue the debtor spouse for student loan debt owed, obtain a court judgment, and pursue the debtor spouse in other ways, such as putting a lien on property. If the non-debtor spouse bought property, such as a house, in joint name with the debtor spouse, and the government puts a lien on the property due to the debtor spouse's default on a student loan, the couple may be unable to sell the property until the student loan is repaid. However, in many cases, the government may permit the sale if the debt is paid at closing, and in some cases, the government may waive its lien.

If there is a divorce, and the debtor spouse's wages are garnished by the government due to a delinquent student loan, New York courts will disregard the garnishment in determining child support and spousal maintenance obligations, as long as the garnishment is considered the debtor spouse's fault.

In addition, delinquent student loans may impact tax refunds. Mr. Bhaskar explains, "If a spouse defaults on a federal student loan, the government is allowed to take money from their tax refund, without obtaining a judgment or otherwise going to court. So, if spouses choose to file jointly, their refund could be impacted by a spouse whose loan is in default."

Significant student loan debt is a reality in the lives of the vast majority of people who graduate from law school. The best way to minimize - though not eliminate - the impact of this debt on marriage is for the debtor spouse to make all loan payments on time, in full, and to make realistic financial plans in the context of these payments. If the debtor spouse does default on a loan, debt rehabilitation is an option.

Justine Borer, Esq. has a private practice in New York City focusing on matrimonial law. She is an adjunct professor in the Philosophy Department at John Jay College. She recently received a Certificate of Distinguished Service for her pro bono work in the New York State Courts initiative Access to Justice, assisting low-income litigants with uncontested divorces and family law issues.

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This page contains a single entry by Julie Houth published on November 22, 2019 12:00 AM.

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