[UPDATE – The passage of the revised Illinois Marriage and Dissolution of Marriage Act renders the legal analysis in this post inapplicable to cases pending after January 1, 2016. The revised 750 ILCS 5/505(h) explicitly authorizes the courts to deduct student loan payments in calculating a child support obligor’s net income.]
Many parents today face the financial reality of paying child support. Many of those same parents also face the reality of repaying their own, sizeable, student loan debt. In Illinois, child support is set according to statutory guidelines, which set support based upon a percentage of the supporting parent’s net income. By law, is a noncustodial parent allowed to deduct student loan payments in calculating his or her net income for child support purposes?
The answer is maybe, sometimes. For child support purposes, the term “net income” is defined by statute. It is calculated by taking all of the supporting parent’s income from all sources and subtracting particularly specified deductions, such as taxes, union dues, health insurance premiums, and the like. The statute also allows for the deduction of:
“Expenditures for repayment of debts that represent reasonable and necessary expenses for the production of income, medical expenditures necessary to preserve life or health, reasonable expenditures for the benefit of the child and the other parent, exclusive of gifts. The court shall reduce net income in determining the minimum amount of support to be ordered only for the period that such payments are due and shall enter an order containing provisions for its self-executing modification upon termination of such payment period.”
So, with the media declaring that America has a $1.2 trillion college debt “crisis,” will custodial parents soon face a corresponding reduction in child support crisis? Will a noncustodial parent who racked up massive student debt in obtaining a professional degree necessarily be able to deduct that student loan payment from his income when calculating his child support obligation? Not necessarily – but possibly some of it.
First, what exactly falls under the category of “expenditures for repayment of debts”? Second, how can one determine if certain expenses were, in fact, “reasonable and necessary … for the production of income”?
In 1997, the Illinois Appellate Court for the Fifth District recognized that repayment of student loans do fall within these parameters in the case of Marriage of Davis. However, in the 2004 case of Roper v. Johns, that same Fifth District court noted that, “our opinion [in Davis] should not be read as holding that student loan payments will always be completely deductible. Like other debt payments deductible under this provision, student loans must be both reasonable and necessary for the production of income.” The Court further stated, “Simply because an expense falls into the category of a debt repayment does not mean that it is necessarily deductible.”
The Court in the Roper case noted that in the 1992 case of Marriage of Heil, it held that a noncustodial father paying child support could only deduct half of his mortgage payments on a hunting lodge he used to entertain business clients because “the debt incurred in buying the lodge was reasonable and necessary for the production of income because the father used the lodge for personal purposes approximately half the time.” And in the same way, the court saw “no principled reason to treat a student loan debt any differently.” The court concluded that, “courts must have flexibility to find student loan debt partially deductible.”
So while in some cases student loan payments can be deducted from one’s income to calculate net income for child support purposes, certainly not all student loan payments will. And it’s easy to see why: allowing a supporting parent to deduct all of his or her loans can create a massive windfall to the noncustodial parent when calculating child support, particularly if he or she racked up “unnecessary” or “unreasonable” debt in attending private degree programs or obtaining multiple degrees, which would be fundamentally unfair to the child who needs and deserves adequate food, shelter, and clothing.
For example, in Roper, a young father whose child was born while he was in high school, went on to attend a four-year university immediately followed by a four-year private and costly joint degree joint graduate program. He was ordered to pay child support to the mother of his child, and he attempted to deduct the entirety of his student loans monthly payment in calculating his net income for child support purposes. Ultimately, the court noted that, “Illinois courts have defined ‘necessary’ expense as ‘those expenses laid out by a parent with good-faith belief his or her income would increase as a result, and which actually did act to increase income or would have done so absent some extenuating circumstances.’” Reasonable means “not immoderate, extreme, or excessive considering the relationship between the amount of the expenditure and the amount by which the parent’s income is expected to increase as a result.”
In Roper, the father’s earning capacity was certainly improved by obtaining these degrees, so they were, to some extent, necessary for the production of income. However, the court found that the cost incurred in doing so was not “reasonable – at least not in its entirety” because he certainly could have attained those degrees “without incurring such an overwhelming level of debt.” He could have worked a job using his college degree and attended law school part-time. He could have “waited a few years between college and law school so he could pay down some of undergraduate loans and save money towards his law school tuition and expenses,” or simply applied to law schools with more affordable tuition rates.
Secondly, the debt he incurred was excessive when compared to how much his income increased as a result. In other words, there must be some proportionality to the amount of debt incurred compared to the amount by which the noncustodial parent’s income increased.
Ultimately, the courts and the legislature are concerned with the best interests of the child that is to be supported. The Roper court noted that the father’s responsibility to support his child is “inherently relevant” and an “expenditure that might be reasonable for a student who does not have the responsibility of a young child may not be reasonable for a parent. We seriously question whether any custodial parent would have felt free to remain a full-time student for eight years.”
A parent’s choices ought to be affected by his or her obligations to support the children. As such, if you are repaying sizeable student loans every month, you may be entitled to take a deduction from your net income for child support calculations. However, keep in mind that your deduction may only be partial, depending on your family circumstances and whether the student debts you incurred were both reasonable and necessary for the production of income.