Going through a divorce can be complicated and expensive. The average cost ranges between $12,500 and $19,200, depending on whether there are children involved, according to Lawyers.com.
But according to our debt and divorce survey, student loan borrowers tend to have it worse than people without student loans. Here’s what we found.
- Student loan borrowers take on more debt in a divorce. Fifty-eight percent of divorcees with student loans took on debt to help pay for attorney fees and other related costs during their divorce proceedings. Compare that with 48% percent of all divorcees who borrowed money to pay for a divorce.
- Couples with student loan debt are more likely to delay divorce because of cost. More than a third of respondents with student loans (35%) delayed their divorce because they couldn’t afford it, compared with 24% of couples without student debt.
- Student loan debt is a contributing factor in some divorces. Thirteen percent of respondents who had student loan debt going into their marriage claim that it eventually led to the end of their marriage.
- Divorce has caused the majority of divorcees to change their money habits. Almost 7 in 10 divorcees have changed how they manage their money after their divorce. This holds true for people with and without student loans.
The costs associated with divorce
The cost of a divorce can vary depending on how you handle it and what’s involved. For example, mediation can be cheaper than a litigated divorce where one or both sides contest the terms of the annulment. Common costs associated with divorce include:
- Lawyer fees
- Document fees
- Appraisal fees
- Accountant fees
- Parenting classes
- Custody assessment
- Court fees
Respondents to our survey spent an average of $18,652 on their divorce proceedings. Interestingly, student loan borrowers spent over $2,000 more than people without student loans on their divorce.
Besides paying these costs, you may be on the hook for some of your ex-spouse’s student loan debt, which could make your divorce even more expensive. Specifically, this is the case if you live in a community property state, which includes Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
“If a person applies for that debt while they’re married, it’s considered community property,” said Taetrece Harrison, a New Orleans-based family law attorney at Harrison Law Group. “So, half the debt is yours, and half the debt belongs to the spouse. It doesn’t matter if the loan only has your name on it.”
If you get married, for instance, and your spouse takes out $50,000 in student loans to pay for graduate school, you could be forced by the court to split the student loans and pay half of it.
According to Harrison, it’s possible to create a payment plan with the court, but you may need to pay the full amount all at once.
Why student loan debt can lead divorcees to take on more debt
Class of 2017 graduates left school with $39,400 in average student loan debt.
With a 10-year repayment term and a 6.00% interest rate, that’s a monthly payment of $437. So it’s no surprise that 28% of student loan borrowers with federal loans in 2017 were on income-driven repayment (IDR) plans, according to the College Board.
These plans make it possible to get a lower monthly payment based on your discretionary income and family size rather than on the original repayment terms.
When you have monthly payments that you can’t afford or that are stretching your budget too thin, paying thousands of dollars for a divorce out of pocket can be difficult.
Based on our survey, 58% of student loan borrowers took out more debt to cover the costs of their divorce versus 43% of people without student debt. What’s more, 23% of student loan borrowers borrowed $10,000 or more for their divorce, and 10% took out $30,000 or more in loans.
Why delaying divorce can be costly
Student loan borrowers are more likely to delay their divorce because of the costs associated with an annulment. Of the people we surveyed, 35% of respondents with student loan debt had delayed the proceedings because of cost, while only 24% of people without student loans did so.
But delaying a divorce can come with its own costs. “People’s whole situations can change,” said Harrison. “There are a lot of different factors that come into place. Things may change financially for you where things get worse, and if you had gotten some assistance, you could have gotten a divorce when you wanted it.”
To avoid this problem from the get-go, Harrison recommended getting a prenuptial agreement. “The easiest time to get someone to agree with something is when you’re in love,” she said.
Here are some other potential issues that could come up:
- New and appreciated assets: Any assets that you accumulate before you file for divorce can still be considered marital property.
- Alimony: If you’re going to be on the hook for alimony, the amount and duration of your monetary support are partially based on the length of your marriage.
- Emotional costs: Nobody wins in a divorce, and delaying the end of a tumultuous relationship can be hard on you and your spouse. If children are involved, delaying the inevitable can also be hard on them.
- Moving on: Waiting to get divorced can make it difficult to move on. In fact, if you start a new relationship or move out before filing for divorce, that decision could be used against you, especially if it comes to a custody battle.
How student loans can lead to divorce
More than a third of student loan borrowers claim that debt and other money factors contributed to their divorce, whereas only 23% of divorcees with no student loans claim the same reasons. In fact, 13% of divorcees blame student loans specifically for ending their marriage.
Harrison sees how student loans could make other problems worse, but she doesn’t see them as the primary reason for someone wanting to leave a marriage.
“Usually there’s some relationship stuff that’s going on, and then on top of that, they start to complain about the debt,” she said. “I don’t think [student loan debt] would be the driving factor, but it’s definitely a secondary factor.”
That said, money problems of any kind can make for a rough marriage, and if you have oppressive student loan debt, the financial pressure can become unbearable.
Large debt balances and monthly payments can make it difficult to buy a home, save for retirement, or make it from paycheck to paycheck. And since it’s virtually impossible to get student loan debt discharged in a bankruptcy, you’re stuck with it whether you can afford it.
This feeling of being trapped can exacerbate all the other issues you encounter in marriage, money-related or not.
Another survey we did about student loans and relationships found other ways student loan debt can harm a marriage. For example:
- Thirty-six percent of student loan borrowers report having lied to a partner about money.
- Roughly a third of respondents claimed a decreased sex drive because of their student loans.
- Many student loan borrowers have delayed big relationship steps because of their debt, including starting a family and taking their first romantic getaway.
While student loan debt isn’t guaranteed to cause problems in a marriage, it can be a concern.
What you can do about your student loan debt
If you’re trying to manage student loans and marital problems, finding ways to reduce your debt burden can help relieve some of the pressure.
If you’re already considering divorce, you can still improve your monthly cash flow and reduce the amount of debt you need to take on as a result of the annulment. Consider these steps.
1. IDR plans
If you have federal student loans and aren’t already on an IDR plan, applying for one could reduce your monthly payment to between 10% and 20% of your discretionary income.
This option alone can ease a lot of short-term cash flow problems and make it possible to cover other essential expenses and work toward other financial goals. But keep in mind that private student loan companies typically don’t offer IDR plans.
2. Apply for a forgiveness program
Federal student loans also give you access to loan forgiveness, primarily through the Public Service Loan Forgiveness (PSLF) program and teacher loan forgiveness.
The PSLF program, for instance, offers forgiveness after you’ve made 120 qualifying monthly payments if you work for a qualifying government or nonprofit organization and meet other requirements.
While this may not necessarily solve short-term problems, it can be the light at the end of the tunnel that you need right now.
3. Student loan refinancing
Student loan refinancing companies allow you to consolidate your student loans into one new loan and potentially get a lower interest rate or monthly payment in the process.
These lenders offer both fixed and variable interest rates, but you typically need a great credit score and financial profile to get the lowest rates available.
Student loan companies also allow you to change your repayment term — some of the best lenders go up to 20 years — which can also help you lower your monthly payment.
One drawback to refinancing federal student loans is that you lose certain benefits, such as access to IDR and certain student loan forgiveness programs. But if you don’t need those benefits and you can get a lower rate or payment through refinancing, it can be worth it.
Whatever you choose to do with your student loans, it’s essential that you take the time to do your research and consider all your options.
By doing your due diligence, you can potentially improve your relationship with your spouse. And if not, you can at least improve your financial situation for the long term.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.