Will Student Loan Forgiveness Impact Debt Division?
The cost of a college education has increased significantly in the last few decades. Student loans can stay with you for years after graduation. The average student loan debt is $28,950 per borrower, and 55% of students from four-year public institutions had student loans, according to Forbes. If you are going through a divorce in Pennsylvania, student loan forgiveness may impact how marital debts are divided between you and your spouse.
What Is Student Loan Forgiveness?
Forgiveness of a student loan means you are no longer required to pay back some or all of the loan. In some cases, the terms cancellation or discharge are used instead of forgiveness. Cancellation is often used when forgiveness is related to employment, while discharge may be used in other circumstances, such as disability or the closing of the school where you received your loans. Student loans can be forgiven, canceled, or discharged for a variety of reasons, including:
- Public service: If you work for the government or a non-profit organization, you may be eligible for student loan forgiveness under the Public Service Loan Forgiveness Program (PSLF). Under this program, your remaining balance on Direct Loans is forgiven after you make 120 qualifying monthly payments while employed full time by a qualifying employer.
- School closures: If a school you are attending closes during or shortly after your enrollment, you may be eligible to have federal student loans discharged.
- Teaching: You may be eligible for forgiveness of up to $17,500 on a Direct Loan or FFEL Program loan after teaching full time for five complete, consecutive academic years in a low-income elementary school, secondary school, or educational service agency.
- Disability: If an injury or medical condition has left you permanently and totally disabled, you may qualify for discharge of federal student loans and/or Teacher Education Assistance for College and Higher Education (TEACH) grant service obligations.
What Is the Current Administration’s Relief Plan?
The Biden-Harris administration has announced a three-part plan to provide relief to student loan borrowers. The plan involves extension of the student loan repayment pause to the end of 2022 and targeted debt relief for low-income and middle-income families. The U.S. Department of Education will provide up to $20,000 in debt relief to recipients of Pell Grants with loans held by the Department of Education. Non-Pell Grant recipients may receive up to $10,000 in debt relief. Borrowers with annual income for individuals of less than $125,000 or household income of less than $250,000 may qualify.
How Do Student Loans Factor into Marriage and Divorce?
It is best if you and your spouse can come to an agreement on debt division and the other terms of your divorce out of court. If you are unable to do so, a family court judge will decide. Pennsylvania is an equitable distribution state, which means debts accumulated during the marriage will be divided in a fair and equitable manner, but not necessarily split down the middle.
If one or both spouses came into the marriage with existing student loans, each spouse will leave the marriage with responsibility for his or her own remaining student loan debt. On the other hand, student loan debt incurred during the marriage is subject to division in a divorce. The court will consider various factors in determining how to distribute the debt, including:
- Income of each party
- Borrower spouse’s ability to pay off student loans alone
- How the non-borrower spouse supported the student spouse
- Extent to which the non-borrower spouse benefitted from the other spouse’s education
If you believe student loans should be divided differently in your divorce, your best course of action is to speak with an experienced Montgomery County divorce attorney as soon as possible. Contact the Law Offices of Sheryl R. Rentz, P.C. at (610) 645-0100.