Student loans are often forgotten when couples think about relationship property and relationship debt. Personal debt will usually remain with the person that incurred the debt, while relationship debt is divided equally (if you have been together for 3 years or more). The treatment of a student loan should be considered before entering into a Prenuptial “prenup” or Contracting Out Agreement and at the end of a relationship when you sign a Separation Agreement.
In New Zealand, student loans can be made up of tuition and living costs. As a default position, student loan debt is a personal debt. However, if you can demonstrate the student loan (i.e. living costs) was used to cover family household costs or used to cover the cost of your children, the student loan could be considered relationship debt. Likewise, if you can show that the intention of the student loan (i.e. tuition) was used towards a qualification for the purposes of a “common enterprise” for benefit the family then it could also be argued that it is a relationship debt.
- Eve attended university and graduated with a teaching degree and a student loan of $50,000.00. Eve then started working as a teacher and met Adam later in the year. It is likely that Eve’s $50,000.00 student loan would treated as her own personal debt.
- Eve met Adam at university and they lived together while they studied. Eve then borrowed living costs to help cover their weekly supermarket grocery shop. If Eve could show their joint spending of the living costs part of the student loan could be treated as relationship debt.
- Eve and Adam have been dating and decide to start up a distribution company. They decide together that Eve should go to the university and get a business degree to help their company. If Eve could show that the intention of the loan was to get a qualification to better the couple’s distribution company then a portion of the student loan could be treated as relationship debt.
It is important to note that student loans can be a hybrid apportioned debt of both personal and relationship debt. If you are concerned, please contact our relationship property team today.