It’s happened. You’ve found the person you want to spend the rest of your life with and can’t wait to marry. There’s just one hitch: your partner has thousands in outstanding student loans. Although marrying someone with student loan debt doesn’t mean the marriage is doomed, it could increase stress about money. According to the American Institute of Certified Public Accountants (AICPA), 73% of couples that live together said financial decisions were a source of tension in their relationship, and student loans can play a role in that problem. But it’s not all doom and gloom! Learning about the issues with marriage and student loan debt can help you prepare for any problems, and you and your partner can devise a plan for handling the debt together.
Understand How Your Partner’s Student Debt Impacts Your Marriage
Student loan debt is typical; in fact, The College Board reported that 54% of college students that graduated with a bachelor’s degree left school with student loan debt, with an average balance of $29,100. Because so many people use student loans to finance their education, there’s a good chance that the person you fall in love with may have outstanding loans. And student loans can have a significant impact on your life together.
Managing Emotions
If you don’t have open and honest conversations with your partner about finances and debt before you get married, you could be in for a nasty surprise. Finding out that your partner is drowning in debt can wreck all your dreams for your marriage; as you deal with debt, you may have to put off your goals, such as buying a home or starting a family. Those issues can cause substantial tension and lead to volatile emotions. To avoid those problems, talk openly about your finances and debt, including student loans, car loans and credit cards. Making sure you both know where you stand ahead of time will allow you to enter the marriage with a clear understanding of what you’re up against.
Future Bills
The average student loan payment is $203 per month. But if your partner has a large amount of student loan debt and high interest rates, their payment may be much higher. As you are building your careers and new life together, spending so much money on student loans every month may make it harder to make ends meet. You may find yourself struggling to cover the bills or living paycheck-to-paycheck.
Emergency Funds
Before you can start tackling your spouse’s debt, it’s crucial to establish an emergency fund. Unexpected expenses — anything from a car repair to a broken water heater — are inevitable, so planning and setting money aside can prevent those issues from becoming major problems. Eventually, you’d ideally have three to six months’ worth of expenses tucked away in an emergency fund. But it may be better to start with a smaller goal when building an emergency fund while paying off student loans. For example, you may build an emergency fund of $1,000 or save enough to cover one month of expenses. After paying the debt in full, you can focus on building your savings.
Tax Implications
Getting married is a major life milestone and a financial choice that can affect your taxes. There are two significant tax implications related to student loan debt:
- Marriage can impact your repayment plan: How does marriage affect student loans? Marriage can affect your payments if you have federal student loans and are enrolled in an income-driven repayment (IDR) plan. Some plans consider your spouse’s income when determining your payments, even if you file separate returns. If your spouse works and earns an income, you may find that your payments increase considerably, or you may not be eligible for an IDR plan at all.
- You may not qualify for the student loan interest tax deduction: Under the student loan tax deduction, you can deduct up to $2,500 or the amount of interest you paid, whichever is less, on your taxes. However, you are only eligible if your modified adjusted gross income is less than $85,000 ($175,000 if you are married filing jointly). You aren’t eligible for the deduction if your spouse’s income pushes you over that threshold.
Taking on More Student Debt
Generally, you aren’t liable for your partner’s debt when you’re unmarried as long as you didn’t co-sign the loan. However, you could be on the hook for your spouse’s loan repayment if your partner takes on student loans after you’re married. If you live in a community property state, you share a legal obligation for repaying new debt.
How to Deal With Your Future Spouse’s Student Debt
Marrying someone with student loan debt can be a daunting idea, but if you and your partner work together, you can come up with a plan to manage the loans and start building your life together:
Consider Signing a Prenup
It may not feel romantic, but creating and signing a prenuptial agreement (prenup) can be a smart idea if your partner has a large amount of student loan debt. A prenup is a legally binding contract stipulating how your assets and debt will be divided if the marriage ends in divorce. Suppose your partner plans on taking on additional loans and you live in a community property state. In that case, you can use a prenup to clarify that your partner is solely responsible for the loans’ repayment if you split up.
Create a Budget
With student loans, creating a monthly budget is critical. Work together as a couple to list your income and expenses, and look for areas where you can cut back to ensure you can comfortably afford your payments. Setting up recurring meetings (you can dub them money dates!) is a good idea to review your spending and progress toward your goals. Regularly checking in will help you stick to your budget and keep you on the same page.
Pick a Payoff Strategy
If you and your partner want to pay off debt more quickly, consider which student loan repayment strategies are best for you. Two of the most common are the debt avalanche and the debt snowball. With the debt avalanche, you make all the required monthly payments and put any extra money you may have toward the account with the highest interest rate. Once the highest-interest loan is paid off, you roll over the money you paid toward that loan to the account with the next-highest rate. You repeat the process until you’re completely debt-free. It’s best for those that want to save as much money as possible. The debt snowball works similarly, except you first target the debt with the smallest balance rather than the highest interest rate. For those that can get frustrated or burned out when they don’t see instant results, the debt snowball can be a better option than the debt avalanche; you’ll pay off individual accounts faster, which can help you stay motivated. Read more: Debt Snowball vs. Debt Avalanche Strategies
Keep Debt Separate
Some lenders allow borrowers to refinance their student loans and combine their debt together. While one monthly payment can be appealing, think twice before using this strategy. If the marriage goes south, dividing the debt will be extremely difficult, and you could be on the hook for its repayment. Instead, keep your debt separate.
Consult a Professional
If you and your partner are overwhelmed by student loan debt and need help figuring out where to start, consider meeting with a non-profit credit counselor. The counselor will work with you to develop a budget and a debt repayment plan. To find a counselor, visit NFCC.org.
Is Marrying Someone With Student Debt a Good Idea?
Marrying someone with student loan debt isn’t necessarily bad; if you know and trust your partner and think they are generally responsible, it shouldn’t be a problem. Before the big day, sit down together to review your finances and create a budget. By working together, you can make the loans more manageable and minimize their impact on your goals.
Refinance Student Loan Debt With ELFI
If your partner has student loans with high-interest rates, student loan refinancing can be a wise decision. They could qualify for a lower or longer rate and get a smaller monthly payment. And one of the significant benefits of refinancing student loans is the ability to pay off loans faster and save money. With ELFI, you and your partner can refinance the total outstanding balance, and you can view potential loan options without affecting your credit score.
