For many people, student loan debt is one of the largest liabilities they incur in life. If you pursue graduate education, this debt can potentially exceed the mortgage on your home. Most people justify taking out student loans because they expect to receive a lifetime of enhanced earnings and opportunities.
As a general rule, Florida law provides that student loans incurred during the marriage are marital liabilities. See Rogers v. Rogers, 12 So. 3d 288 (Fla. 2d DCA 2009); see also Smith v. Smith, 934 So. 2d 636 (Fla. 2d DCA 2006); Adams v. Cook, 969 So. 2d 1185 (Fla. 5th DCA 2007) (trial court erred by finding that wife’s law school loans were non-marital); Banton v. Parker-Banton, 756 So. 2d 155 (Fla. 4th DCA 2000) (reversing equitable distribution scheme where court’s treatment of student loans as marital or non-marital appeared arbitrary).
In other words, if you get a divorce, the court will presumptively find that any student loans incurred during the marriage are marital, and each party will likely be responsible for one-half of any such loans (or, the loans will offset other assets and liabilities).
This allocation of debt strikes many people as inherently unfair. The allocation would be justified if both parties were going to share in the enhanced earnings. But, it is inequitable to impose such an enormous financial burden on a party that will receive no associated long-term benefit with the debt.
Imagine this scenario: two recent college graduates decide to get married. The wife takes a job working full-time as a nurse and earning $60,000 annually, while the husband decides to attend medical school. After four years, they divorce. The wife now finds herself straddled with as much as $150,000 in student loan debt, which could consume a third of her income for the next decade.
Florida courts have held that, in the absence of specific findings supporting the unequal distribution of a student loan debt, the debt must be equitably distributed between the parties. See, e.g., Rogers, 12 So. 3d at 291. The fact that one party will not receive any benefit from the other party’s education because of the dissolution is not a factor to be considered when allocating a marital debt for student loans. Id.; see also Smith, 934 So. 2d at 641 (that one party will not receive any benefit of the other party’s enhanced income after the dissolution is not a factor for allocating student loan debt). Thus, absent some other justification for an unequal distribution, controlling case law forbids a trial court from awarding student loan debt incurred during the marriage solely to one party or the other.
The holding in Rogers essentially takes the single most compelling reason for an unequal distribution of the student loan debt (i.e., that the party who incurred the debt is going to take all the benefit and only half of the burden) and flushes it down the toilet. My personal view is that Rogers was wrongly decided. The Legislature should consider amending section 61.075, Florida Statutes, to account for the inequity presented by Rogers.
A majority of other states reject the notion that student loan debt should be divided equally. The Connecticut Supreme Court dealt with a similar scenario in Simmons v. Simmons, 244 Conn. 158 (Conn. 1998). In Simmons, the wife worked as a nurse and supported the family while the husband attended medical school. In the third year of husband’s surgical residency, he filed for divorce. The wife asked for the value of his medical degree (valued at $3.1 million) to be allocated as a marital asset. The Connecticut Supreme Court concurred with the vast majority of states and held that the medical degree was not subject to equitable distribution because, among other reasons, the income from the medical degree was merely an expectancy, not a presently existing property right. Id. at 168-69. After considering the equities of the “working spouse/student spouse syndrome,” however, the court allocated the medical student loan debt solely to the husband and awarded nominal alimony to the wife. Id.
Similarly, in Tasker v. Tasker, 395 N.W.2d 100, 105 (Minn. App. 1986), the Minnesota Court of Appeals allocated student loan debt solely to the parent that incurred the debt, even though that spouse was unemployed. But see Roberts v. Roberts, 670 N.E.2d 72 (Ind. Ct. App. 1996) (although husband’s degree was not marital property, his student loan debt was still a marital obligation).
In some cases, student loans are used to provide support for the family while the student spouse is attending classes. To the extent that the loans were used to pay marital living expenses, it is proper to treat the debt as marital and allocate it accordingly. See, e.g., Forristall v. Forristall, 831 P.2d 1017 (Okla. Ct. App. 1992) (husband’s student loans were marital because his medical education was a joint goal of the marriage and loan proceeds were used in part to support the family); McConathy v. McConathy, 632 So. 2d 1200, 1206-07 (La. Ct. App. 1994) (student loan debt was marital because it was incurred with the expectation that it would benefit the marriage, and part of loan proceeds were used to support the family); Hicks v. Hicks, 969 S.W.2d 840 (Mo. Ct. App. 1998) (husband ordered to pay one-half of wife’s student loans, which were used to buy groceries, pay bills, and provide daycare while the wife was in school).
Perhaps Florida courts (or lawmakers) should look to how Colorado courts have allocated student loan debt. See, e.g., In re Marriage of Speirs, 956 P.2d 622 (Colo. Ct. App. 1997). In Speirs, the Colorado Supreme Court recognized that:
a spouse’s pursuit of higher education during marriage represents a common goal of both parties to increase their economic standing. Both marital partners may expect to share in the rewards of such education, and it is not unusual for one spouse to assist the other in the accomplishment of that goal by providing a level of financial support as well as assuming responsibility for the tasks of everyday life. It is also a common reality that student loans are obtained not only to finance tuition costs, but also to provide for the general support of the family while the spouse attends school.
treating student loans contracted during marriage as marital debts in no way forecloses the trial court’s ability to award such debts to the spouse actually incurring them. Rather, removing such debts from the class of separate liabilities enhances the trial court’s ability to enter the most equitable distribution of the marital estate based upon all of the circumstances affecting the parties’ situation at the time of dissolution.
Id. In Speirs, the trial court found that the student loans were marital. Id. at 625. The trial court allocated solely to the wife the portion of her student loans that were used to pay wife’s law school tuition. Id. And, the trial court allocated equally to both parties the portion of wife’s student loans that were used to pay marital expenses. Id. Both parties appealed, with the wife arguing that the entire loan obligation should have been marital and the husband arguing that none of the liability for her student loans should have been allocated to him. Id. The Colorado Supreme Court rejected the contentions of both parties and affirmed the trial court’s equitable distribution of the wife’s student loans. Id.
In Florida, as in almost all other states, professional degrees and licenses are not assets that are subject to equitable distribution. See, e.g., Joachim v. Joachim, 942 So. 2d 3 (Fla. 5th DCA 2006) (holding that a professional educations and licenses are not assets subject to equitable distribution). But, ironically, the debt used to acquire these non-marital assets is marital.
Rogers and Smith both reject any notion that trial courts can or should effectuate an unequal distribution of student loan debt based on the fact that one spouse will gain substantially all of the benefit of a non-marital asset, namely that spouse’s enhanced education and income potential. This creates a somewhat unique problem because debt usually follows the asset for which it was incurred.
When distributing assets and liabilities, court are supposed to be able to consider any “factors necessary to do equity and justice between the parties.” See Fla. Stat. § 61.075(j). Rogers and Smith thus appear to conflict with section 61.075(j), Florida Statutes. If trial courts cannot allocate debt based on which party stands to benefit from the debt, perhaps an unequal distribution might be justified under one of the following bases:
(b) The economic circumstances of the parties.
(c) The duration of the marriage.
(e) The contribution of one spouse to the personal career or educational opportunity of the other spouse.
(g) The contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.
Alternatively, parties may look to an alimony award to fight this inequity. In some instances, courts are authorized to use lump sum alimony to “balance inequities resulting from property disposition in the final judgment.” See Banton, 756 So. 2d at 156. For a lump sum alimony award, however, the spouse’s ability to pay cannot not be based on earnings to be accumulated in the future. See, e.g., Hughes v. Hughes, 438 So. 2d 146 (Fla. 3d DCA 1983). One potential alternative solution for working spouse/student spouse dilemma might be to award nominal alimony until the “student” obtains his or her professional degree or license.
Regardless of how it is accomplished, our lawmakers or courts should find some solution to the problem of saddling one spouse with the other’s student loan debt, especially in connection with a short-term marriage.
If you have questions about your rights in a divorce or family law matter, please contact an experienced Tampa family law attorney.
By Richard J. Mockler