Those two little words signify big changes — a longtime commitment and the beginning of a new phase as two people merge their lives.
But when you add student loans to the mix, things can get more complicated.
According to a survey on marriage and debt by the National Foundation for Credit Counseling, 37 percent of respondents said they wouldn’t marry someone until their debt was paid off.
But 46 percent said they’d marry someone in debt and work to pay it off together, and 10 percent said they’d marry someone in debt but wouldn’t help pay their debt.
No matter which camp you’re in, there are several things you should know about student loans and marriage before you tie the knot.
1. How much debt are you bringing to the table?
Hopefully, by the time you’ve started to talk about building a life together, you know how much student loan debt each of you has.
If not, it’s important to lay it all out there: How much debt are you bringing to the relationship? If one person has student loan debt and the other doesn’t, it might cause friction in your relationship.
If you both have student loan debt, it can be tough to manage, and it might affect your financial milestones, such as when you buy a house or start a family.
No matter the case, as a married couple, you’ll need to tackle your finances together, including debt. Couples need to be transparent about how much debt they have and come up with a plan together to pay it off.
2. Your income-driven plan may change
If you’re on an income-driven repayment plan for your federal student loans, getting married could affect your payments.
If you file your taxes as “married filing jointly,” your income and that of your spouse will be combined. As a result, your Income-Based Repayment bill could go through the roof.
Plus, if you’re reporting joint income, you might not be eligible for certain income-driven plans.
Why? To qualify for Income-Based Repayment or Pay As You Earn, your monthly payment must be less than what it would be under the Standard Repayment Plan.
So, while marriage might reduce your tax bill, you could be losing out on some student loan benefits.
One option is to file your taxes as “married filing separately,” which typically reduces your student loan bill on an income-driven plan compared to filing jointly.
Another option is to consider Income-Contingent Repayment (ICR), which doesn’t have an income eligibility requirement. However, it’s important to look at the big picture to see if it makes financial sense.
According to the Federal Student Aid website, “Under the ICR plan, your payment is always based on your income and family size but will usually be higher than payments under the IBR and Pay As You Earn plans and in some cases could be higher than the amount you would pay under the 10-year Standard Repayment Plan.”
If you’re concerned about the financial implications of student loans and marriage — and it’s wise to be — consult a tax specialist or financial expert to decide what’s best for your situation.
3. Your spouse could be responsible for your loans
In certain situations, your spouse could be responsible for your student loan debt. While all federal loans and some private loans offer a death discharge if the borrower dies, some private loan lenders might not. So be sure to read the fine print.
If you go back to school and your spouse co-signs your loan, he or she will be legally responsible for your debt if you fail to make payments.
Even without co-signing, your spouse might be liable for your student loans. This is the case if you take out a student loan while you’re married and live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin).
Your spouse also might be responsible for your student loans if they are in default and you have no wages to garnish.
4. Not every lender allows you to refinance your student loans jointly
If you want to refinance or consolidate your student loans and those of your spouse into one convenient payment, your options are limited. Purefy is currently the only major student loan refinancing bank that offers couple loans.
With this option, you can use your combined household income and the higher of your two credit scores to get the best interest rate.
That said, you cannot pursue consolidation for your federal loans as a couple — only as individuals. The same goes for refinancing student loans with other banks.
Keep in mind, however, that if you go from “I do” to “I don’t” and get a divorce, consolidating your loans together presents many issues.
Getting married can be a wonderful and logical next step for couples, but it’s important to evaluate how managing student loans and marriage will work. Before you enter into a legal union, you’ll want to know how student loans will affect your financial union as well.
Look at the big picture, read the fine print, and come up with a plan to pay off debt together. You’ll have a greater chance at happily ever after that way.
Ben Luthi contributed to this article.
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