How should the law apply to student loans?

The Property (Relationships) Act 1976 treats student loans as any other type of debt.

The Act says there are two types of debts: personal debts and relationship debts. Relationship debts are debts that have been used to acquire relationship property, to contribute funds for family life, or were taken out as part of the partners’ ’common enterprise’.

Generally, the law treats a student loan as each partner’s personal debt. If, however, the partner used their student loan to contribute to the couple’s living costs, or if the study was part of the partners’ common enterprise, the loan (or part of it) might be a relationship debt.

The law says that the value of relationship property to be shared between the partners is calculated by taking the total value of relationship property and then deducting the value of relationship debts. So if a debt is a relationship debt, the partners share the value of the debt equally. If a debt is a personal debt, its value is not shared.

When a relationship ends, the main problem with student loans is that sometimes one partner will have paid back more of his or her student loan than the other partner. This situation could arise where one partner worked while the other stayed at home to care for children. To make things more complicated, if a partner has used his or her income to pay back a student loan, the other partner might be entitled to compensation. That is because income is usually relationship property and student loans are usually personal debts.

We want to know the fairest way of classifying student loans. One option is to keep the current law. That is to classify the loan as a personal debt or relationship debt depending on the particular reasons a partner incurred the loan. The current law does a good job at treating loans fairly in the circumstances of each relationship. The law also entitles a partner to compensation where relationship property is used to pay back one partner’s personal debt student loan.

But the law can be complicated and it is difficult to work out the right level of compensation. It might be simpler to say that student loans should always be relationship debts. In other words, the partners would always share the debt when they separate. That way, if both partners had student loans, it would not matter if one partner paid his or her loan off faster. And it would matter less if the partner used relationship property to pay the loan back.

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