Who Is Responsible for Parent Plus Loans in a Divorce?
Parent PLUS loans are a popular option for parents who want to help their children finance their education. However, in the unfortunate event of a divorce, determining who is responsible for these loans can become a complex and contentious issue. This article will explore the factors that come into play when deciding the responsibility for Parent PLUS loans in a divorce, as well as provide answers to some frequently asked questions on the topic.
In most cases, if the Parent PLUS loan was taken out by one parent, that parent will be solely responsible for repaying the loan. However, divorce proceedings can sometimes lead to an agreement where the non-borrowing parent assumes responsibility for a portion of the loan. This arrangement is typically determined by the court or through negotiations between the divorcing parties.
The responsibility for Parent PLUS loans can also be affected by state laws. In community property states, debts incurred during the marriage are generally considered joint debts, meaning both spouses may be responsible for repayment. However, in equitable distribution states, debts are divided based on what the court deems fair, which may or may not result in shared responsibility for the loans.
It is important to note that even if the non-borrowing parent agrees to assume responsibility for a portion of the Parent PLUS loan, the lender is not legally bound by this agreement. The lender will hold the borrower responsible for the full amount, regardless of any agreements made during the divorce proceedings. Therefore, it is vital to consider the potential financial burden before making any agreements.
Now, let’s address some frequently asked questions related to the responsibility for Parent PLUS loans in a divorce:
1. Can the responsibility for a Parent PLUS loan be transferred to the student?
No, the responsibility for Parent PLUS loans always rests with the borrowing parent.
2. Can the non-borrowing parent be held responsible if the borrowing parent fails to repay the loan?
Legally, the non-borrowing parent cannot be held responsible for the Parent PLUS loan if it was taken out solely by the other parent.
3. Can the borrowing parent request a modification of the loan terms during a divorce?
The borrowing parent can request a modification, but it is ultimately up to the lender to decide whether to approve or deny the request.
4. Will bankruptcy absolve the borrowing parent of Parent PLUS loan responsibility?
Parent PLUS loans are generally not dischargeable in bankruptcy, so the borrowing parent will still be responsible for repayment.
5. Can the court order the non-borrowing parent to contribute to the Parent PLUS loan repayment?
Yes, the court can order the non-borrowing parent to contribute to the repayment of Parent PLUS loans as part of the divorce settlement.
6. Can the non-borrowing parent request a release from the Parent PLUS loan responsibility?
The non-borrowing parent can request a release from the lender, but it is at the lender’s discretion to grant or deny such a request.
7. Can the responsibility for Parent PLUS loans be addressed in a prenuptial agreement?
Yes, a prenuptial agreement can specify the responsibility for any existing or future Parent PLUS loans in case of divorce.
8. Can the borrowing parent refinance the Parent PLUS loan to remove the non-borrowing parent’s responsibility?
Yes, the borrowing parent can refinance the loan in their name only, effectively removing the non-borrowing parent’s responsibility.
9. Can the student be held responsible for the Parent PLUS loan if the borrowing parent passes away?
No, the student is not responsible for repaying the Parent PLUS loan if the borrowing parent passes away. The loan will be discharged upon the borrower’s death.
In conclusion, determining the responsibility for Parent PLUS loans in a divorce can be a complex matter, influenced by various factors such as state laws and court decisions. It is crucial for divorcing couples to seek legal advice and carefully consider the financial implications before making any agreements or decisions regarding these loans.