By: Joshua D. Block, Esq. for Hoffenberg & Block LLC
Contentious litigation is, unfortunately, all too common in cases of divorce, especially when finances, children, or both, are involved. Specifically, one area often wrought with hostility is financing a child’s college education. With the steadily rising cost of college attendance, student loans have become an increasingly popular vehicle to help alleviate the burden of these expenses. However, even with student loans through the Free Application for Federal Student Aid (“FAFSA”) program, scholarships, and grants, many students are still unable to cover the progressively growing cost of attendance. As a result, many parents take out Parent PLUS loans to cover the difference. When parents are divorced, who is responsible for payment of a Parent PLUS loan?
Crucially, only one parent can sign the Master Promissory Note on a Parent PLUS loan. This means that the signing parent is legally responsible for the repayment of the loan, and neither the student, nor the other parent can be held liable. Complicating this matter further are the provisions of Section 513 of the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) (750 ILCS 5/513), which permits courts to require both parents to contribute to a child’s cost of educational expenses. The Supreme Court of Illinois addressed a similar issue in In re Marriage of Petersen, 955 N.E.2d 1131 (2016). The Petersen Court held that a child’s post-secondary educational expenses were in the nature of child support. If a parent has taken out a Parent PLUS loan prior to a Judgment for Dissolution being entered, courts have the authority to require both parents to contribute to the loan. If a Judgment has already been entered and the court has expressly reserved the issue of contribution to college and other educational expenses, then the other parent’s obligation is limited back to the date of the filing of a petition for contribution to college expenses. Id.
Conversely, if a Judgment for Dissolution has been entered and the terms create an affirmative obligation on the parties to pay for children’s post-high school education, then courts may order retroactive payment. See In re Marriage of Donnelly, 35 N.E.3d 125 (2015). The Donnelly Court held that, unlike Petersen, because the parties had agreed to be obligated to pay for their children’s post-high school education, the filing of a petition to allocate college expenses sought enforcement of an existing obligation rather than modification. Id. Accordingly, Petersen only applies where the court has expressly reserved the issue of college expenses, not where a duty to contribute has been clearly established.
While courts can require both parents to contribute to a Parent PLUS loan, if the non-borrowing parent fails or refuses to pay, the consequences for that parent may be limited in nature. They could be held in indirect civil contempt until they comply, as well as pay the attorney’s fees for the borrowing parent seeking enforcement. On the other hand, the borrowing parent may face more tangible consequences if the other parent fails to pay timely, or defaults on the loan completely. In that event, the loan holder has the option to file a lawsuit or attempt to garnish the wages of the borrowing parent.
To avoid these potentially serious problems, divorced parents have various options. If they have an amicable and trusting relationship, the borrowing parent can share the login information to allow the non-borrowing parent to make online payments directly to the loan holder. Alternatively, the borrowing parent can tender receipts to the other party for reimbursement. Additionally, while a Parent PLUS loan cannot be refinanced in the other parent’s name, it can be refinanced in the child’s name. This would relieve the borrowing parent of legal responsibility, and the child would then become responsible for ensuring the payments are timely made. Further, both parents may take their own loans from the Parent PLUS program, provided that the combined amounts do not exceed the cost of attendance, less other aid received. Lastly, the parents may alternate years and each be responsible for their share. These options offer divorcing or divorced parents in Illinois the ability to help pay for their children’s college education while avoiding much of the conflict that is too frequent in such cases.