Student Loans in Equitable Distribution Cases

North Carolina does not automatically classify student loans as either marital or separate debt. A loan is marital debt to the extent it was incurred during the marriage, before separation, for the parties’ joint benefit. The spouse seeking marital classification must prove both that joint-benefit purpose and the debt’s value at separation. The fact that only one spouse signed for the loan is not controlling. Warren v. Warren, 241 N.C. App. 634, 773 S.E.2d 135 (2015); Sapia v. Sapia, 903 S.E.2d 444 (N.C. Ct. App. 2024).

For a spouse’s own education, Warren affirmed marital classification where the spouses agreed on the schooling to improve family income, loan proceeds also paid household expenses, and the family enjoyed the graduate’s higher earnings before separation. The degree itself need not be distributable property for the related debt to qualify as marital. Warren.

But incurring the loan during marriage is not enough by itself. In Sapia, the court affirmed treating only the portion shown to benefit the marriage as marital debt; the wife had not established a joint benefit for the full balance, which included borrowing outside the marriage. A court can therefore classify different portions of the same student-loan balance differently if the evidence supports that division. Sapia.

The same joint-benefit test can apply to a parent’s loan for a child’s education. The court treated a loan for the parties’ adult daughter as marital where both spouses agreed to and participated in obtaining it, despite its being in one spouse’s name. Purvis v. Purvis, 867 S.E.2d 700 (N.C. Ct. App. 2021).

Practical focus: establish when each loan was incurred, its balance at separation, how its proceeds were used, what the spouses agreed or expected, and whether the marriage shared in the resulting earnings or other benefit. Classification is distinct from how much of a marital debt the court ultimately assigns to each spouse. N.C. Gen. Stat. § 50-20; Warren.