Should You Help Your Significant Other Pay Off Student Loans?

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Money is often a major source of strife between couples. It can be difficult for long-term partners to build wealth together when one person has student loans. Marking your status as “Married filing separately” could be a better option for tax purposes, but that’s just one of the financial decisions you’ll need to make.

Perhaps you want to help your significant other pay off student loans, so you can enjoy a debt-free future together. It’s not uncommon for couples to want to combine finances with their partners, which might mean helping them pay off their debt once and for all.

However, others believe in keeping their finances separate. If their partner got into debt, it’s their responsibility to get out. Here are some points to consider on both sides of the argument so you can decide the best course of action when marrying someone with student loan:

Why you should help your significant other pay back student loans
When helping your partner pay off student loans is a bad idea
Bonus: How to file taxes with student loan debt if you’re married

Why you should help your significant other pay off student loans

As someone with $33,000 in student loan debt, I know how burdensome the numbers can feel. My husband does too, since he has more than $300,000 in student loan debt — much of it from medical school.

Even though he owes nearly 10 times more than I do, I still feel it is our debt to tackle together, and we plan on helping each other pay it off in full. After all, we decided together that he would go to medical school. I know that if we also work together to pay it off, we’ll be debt-free that much sooner.

In fact, helping your significant other pay off their student loans can have both financial and emotional benefits:

1. You achieve your goals faster

When one or both partners in a couple have debt, it holds them back from accomplishing what they really want to do together in life. Whether it’s going on a family vacation or saving for retirement, working together to overcome debt can help you achieve your goals as a couple faster — especially if one person earns significantly more income.

This can also be a wise decision if you foresee needing to take out a loan in the future for a major life event, such as buying a house together. It can be a complete win-win: both partners are able to do what they enjoy, reach mutual financial goals quickly and move on to new stages in the relationship.

2. You can strengthen your relationship

When two people enter a long-term relationship, the expectation is that they’ll work together to reach common goals. Yet money troubles are a chief cause of tension for many couples and often go unaddressed. Sitting down to have the difficult conversation about how you’ll pay off debt together can bring money-related issues to the surface and urge you to work together.

It’s also empowering to reach difficult goals together. By paying attention to spending, putting extra income toward loan payoff and concentrating on maintaining a budget, a couple can generate the spirit of cooperation and learn what two people can accomplish together.

When helping your partner pay off student loans is a bad idea

Marrying someone with student loan debt can be a challenge. Every relationship is different, and not all couples will find that helping each other pay off this obligation is the best choice. There are instances when you’re better off letting your significant other tackle this on their own.

1. You maintain separate finances

According to TD Bank’s Love and Money Survey, 55% of couples combine their money. This means nearly half (45%) of couples choose to keep at least part of their finances separate.

There’s nothing wrong with keeping separate finances in a relationship. Some people feel restricted when they have to maintain a shared budget with a significant other, or as though they can’t spend their own money as they please. It’s relatively common for couples to have separate accounts in addition to a joint account for shared expenses, such as mortgage payments and groceries.

If you’re part of a couple that likes to keep things separate, student loan debt should be no different. If you don’t expect your significant other to help pay your credit card bills or everyday expenses, you shouldn’t ask for help paying down student loan debt, either (and neither should they).

2. Your partner manages money poorly

A history of money problems is good reason to let your significant other handle student loan debt without your help. Poor financial decisions or a lack of money management skills won’t improve if you’re there to bail your partner out.

Instead, act as their biggest supporter and only give advice when asked. When it comes to reaching goals — especially money-related ones — it’s sometimes best to let a poor money manager learn the hard way and hone some personal finance skills in the process.

There are plenty of good reasons to help your significant other pay off student loan debt, as well as to stay out of it. Your decision should be based on how well your partner manages money, what you’ve agreed to as a couple and how significantly that student loan debt is impacting your lives.

Remember, the goal of any long-term relationship is to live a happy, prosperous and pleasant life together. So decide what will best contribute to reaching that goal, whether it’s by helping with debt repayment or by allowing your partner to handle it independently.

Alternatives if you don’t want to help your partner pay off student loans

There are plenty of good reasons to not help your partner pay off their student loans — i.e., you have other debts to pay off yourself or they’re not good with money. So if you’ve decided against chipping in, there are other ways for them to get assistance, if needed.

Depending on the type of student loans they have, plenty of payment options are available to help them if they’re having trouble keeping up. A deferment or forbearance will allow them to temporarily lower their monthly payments or stop making payments altogether for a limited time. They might also be able to refinance their private and federal student loans to get a lower interest rate, reduce their monthly payment or both.

Filing for taxes with student loan debt: Married filing separately or jointly?

Regardless of which option you choose, you and your significant other will have to decide together how to file for taxes. When even one person is working to pay off student loans, going with “married filing separately” or “married filing jointly” is a major tax decision you must make.

If your significant other has student loans with an income-based repayment plan, filing separately could result in lower student loan payments. However, do note that married couples who file their taxes jointly typically have lower tax bills. Therefore, opting to file separately while paying off student loans may result in a higher tax bill.

From your tax return to whether you help your significant other pay off their student loans, know that every couple is different. These are personal decisions that you’ll need to make with each other. Work together to find a solution that fits your unique situation.

Laura Woods contributed to this report.

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1 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.

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The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

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2 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of September 9, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of September 10, 2020.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.16% effective August 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.