Getting a student loan to help pay for your courses and/or living expenses? Make sure you know if the student loan could become relationship debt or remain separate debt.

General principles

When couples separate after being together for more than three years, the general rule is that relationship debts are to be divided equally between the parties.  Debts determined to be separate debts are not subject to equal division. 

Separate debts are those that are incurred for individual purposes and not for the relationship.

These rules apply to the extent that they are not altered by a relationship property agreement (known as a section 21 agreement or a contracting-out agreement).

Application to student loans

The classification of a student loan as relationship or separate debt will depend on the purpose for which the loan was used. 

Student loans will usually be treated as personal debts unless the loan or part of the loan was incurred for the benefit of the relationship, or for the benefit of the children.  

For example, if the loan was used for household expenses, expenses for the children, or going towards the maintenance of the family home, then there would be grounds to suggest that it is relationship debt.

Another example is if the student loan was purely to cover the relevant party’s course fees which was incurred prior to the relationship, it would be reasonably clear that it is a separate debt.

However, not all cases are as certain as the above.  It could be argued that the intention of obtaining the qualification was for the benefit of the family and not just for the individual. On this basis, it could therefore be determined that the whole student loan is relationship debt, including both the course fees portion and the living allowance portion.

It should be noted that the financial impact of whether a student loan is relationship debt could become material, as often the amount of student loans owning can accumulate very quickly. 

How to do it right and prevent future disputes

As has been discussed, the answer to the question of whether a student loans is a relationship debt or separate debt is “it depends”.  There is no hard and fast rule.

Therefore, it would be prudent for couples to do a contracting out agreement to eliminate this uncertainty.

Please seek legal advice if you are unsure of the classification of your debts, including student loans.