Posted by Nydia Streets of Streets Law in Florida Divorce
What happens to student loans taken out during the marriage for adult children of a divorcing couple? If the either or both parents co-signed for the loan during the marriage, this is most likely going to be considered a marital debt which is jointly owed by the parents. How does this affect the equitable distribution during the divorce when considering that the loan may also be eventually paid by the adult children? This was an issue in the case Dunkel v. Dunkel, 5D23-55 (Fla. 5th DCA February 28, 2023).
During their marriage, the husband and wife took out loans for the benefit of their adult children for college. In their divorce, the court assigned this debt solely to the former husband and accounted for it in equitable distribution by reducing the former wife’s share of escrowed funds by half of the loan amount. The former wife appealed.
The appellate court reversed, holding “The trial court’s equitable distribution scheme neglects to factor in the very real possibility that the consolidated student loan will never be fully repaid [a footnote states “Indeed, there had been no payment on the student loan for several years prior to trial.”] (or will be repaid, in whole or in part, by the adult children), thereby leaving Former Husband with a windfall. On remand, the trial court is directed to correct this error by making both parties jointly responsible for repayment of the consolidated student loan, and by not making the above referenced adjustment(s) to the distribution of the escrowed marital funds.”
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