North Carolina Divorce Lawyers Blog
Published on:

Student Loans and Divorce

By

Purvis v. Purvis, 2021-NCCOA-616 (2021).

It can be safely said that a majority of the parents in North Carolina want to see their children succeed. And to ensure that success, parents often take on large burdens to provide their children with as many opportunities as possible, including helping them with college. Some parents have to co-sign student loans. The case below discusses how a student loan may get classified when the parents split up.

  • Facts: Father and Mother had one child that went to college. The child took out student loans in her name. During this time, Father also acquired some student loans in his name. They were only in his name because his credit score was higher. But Mother is the one that applied for the loan and became the one to manage the account. Mother also co-signed on some of these loans. The couple split and filed claims for equitable distribution. The court, responding to a motion for summary judgment, found that the loans were a marital debt. Mother subsequently appealed.

 

  • Issue: Did the trial court err when it entered an order concluding that the student loans were a marital debt?

 

  • Holding:

 

 

  • Rationale: A marital debt is unlike a marital asset. Assets are presumed to be marital when acquired during the marriage. A debt does not carry that same presumption. When it comes to debt, the essential elements are that the debt was acquired during the marriage and incurred for the joint benefit of the marriage. In the Court’s limited holding, when the parents both consent and wished to acquire a debt to help put their adult child through college, that is a debt incurred for a joint benefit. One benefit the opinion lists is that their child’s tuition, books, and living expenses were covered by this loan rather than the parent’s out-of-pocket expenses.

 

I should note that this is a case of first impression in North Carolina. The facts clearly indicated that both parents wanted to do this for their adult child. Typically, we see benefit in a more tangible light—was the money used to pay for furniture, clothes, cars? But here, the benefit was more theoretical, probably in the sense that they are providing for their child. It is clear from this opinion that the Court weighs subjective benefit more than objective.