Sunday, May 26, 2013

In New Jersey, if you have high student loan payments, can you get a break on child support?

In a New Jersey Superior Court case the court was asked to consider whether the large student loan debt of a parent should be considered when determining whether to alter a guideline-based child support award. Lozner v. Lozner, 388 N.J. Super. 471 (N.J.Super. 2006).

Mother and Father were married in 1992 and had a son in 1995. The parties finalized their divorce in 2000. Pursuant to the Property Settlement Agreement, Father, who was in law school at the time of the divorce, was required to pay child support in the amount of $98.00 per month. Father acquired almost $240,000.00 in student loan debt for college and law school, and he had almost $50,000.00 in credit card debt, which he claimed was incurred for educational expenses. Father graduated from law school in 2002 and obtained employment immediately at a prestigious law firm in New York. In 2004, Father’s annual base salary was $135,000.00. Father was also awarded bonuses each year ranging from $4,000.00 to $17,500.00. Mother worked at a travel agency and earned approximately $30,000.00 per year.

In 2004, Mother requested an increase in child support based on the substantial increase in Father’s earnings. Father argued that Mother was underemployed and, due to his large student loan debt which required payments of $2,500.00 per month, his child support should not be increased over the $500.00 per month he was voluntarily paying. The trial judge set Father’s monthly support at $746.82 per month.

On appeal, Mother argued that the child support award was too low and that the judge should not have considered all of Father’s educational expenses to reduce the guideline amount. Father argued that the judge should have reduced the amount of child support further by taking into consideration the $580.00 per week Father paid in student loan payments.

When determining child support obligations, courts cannot disregard large student loan debt because parents may be discouraged from financing further education for themselves, which could prove harmful to the child. If the child support is reduced to accommodate a parent’s significant student loan debt, a child would be deprived of any benefit that may have come from the parent’s increased earning power, because the child may be emancipated before the loan is discharged.

Instead, a court may deviate from the child support guidelines only when good cause demonstrates that the deviation would be appropriate. Educational debt incurred to improve earning capacity is one of the factors a court may consider in adjusting child support. The Appellate Court held that substantial loan debt constituted a factor that should be considered when deciding if a deviation from the child support guidelines would be appropriate. It is only considered, however, when the student loan debt was incurred with the goal of improving the parent’s earning capacity.

Credit card debt acquired to maintain a comfortable lifestyle while in school is not the equivalent of student loan debt. Therefore, on remand, the trial court was required to exclude debt that Father acquired that was not reasonably and necessarily incurred to further education and enhance earning capability. Additionally, the debt incurred must not be extreme in relation to the parent’s expected economic benefit and the trial court was required to consider whether Father’s goals could have been achieved without incurring overwhelming debt. It was Father’s burden to provide the court with the loan amount and terms of the loan, as well as the amount of the loans that went directly to educational expenses and amounts that went to non-educational expenses.

A court does not have to allow a parent to use his student loan repayment as a reason to reduce child support payments for the entire time he or she is paying back student loans. The trial court should consider the effect any reduction in child support will have on the family and the relevant ten factors mentioned in the Alimony and Maintenance statute should be used.  The factors are:
(1) Needs of the child;
(2) Standard of living and economic circumstances of each parent;
(3) All sources of income and assets of each parent;
(4) Earning ability of each parent, including educational background, training, employment skills, work experience, custodial responsibility for children including the cost of providing child care and the length of time and cost of each parent to obtain training or experience for appropriate employment;
(5) Need and capacity of the child for education, including higher education;
(6) Age and health of the child and each parent;
(7) Income, assets and earning ability of the child;
(8) Responsibility of the parents for the court-ordered support of others;
(9) Reasonable debts and liabilities of each child and parent; and
(10) Any other factors the court may deem relevant.

N.J.S.A. 2A:34-23(a).

When considering these factors on remand, the Appellate Court required that the trial court should try to fairly balance the needs of Father and child. The best interest of the child, however, is the most important factor when determining the child support award.

If you have questions or concerns about a child support award or how student loan debt might impact a child support award, you should contact an attorney.


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