Those two little words signify big changes—a longtime commitment and the beginning of a new phase of life as couples merge their lives to become a union.
Adding student loans to the mix? Things can get a lot more complicated.
According to a survey on marriage and debt by the National Foundation for Credit Counseling, 37% of respondents said they wouldn’t marry someone until their debt was paid off.
But 46% said they’d marry someone in debt and work to pay it off together, and 10% 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 tying the knot.
1. How Much Debt Are You Each Bringing to the Table?
Hopefully, by the time you’ve started to talk about building a life together, you’ve had the talk about how much student loan debt you each have. If not, it’s important to lay it all out there: How much debt are you each bringing into 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 may affect your financial milestones, like when to 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 Could Change
If you’re currently 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,” you and your spouse’s income will be combined. This could potentially make your income-based repayment bill go through the roof.
Not only that, but depending on you and your spouse’s income, you may not even be eligible for certain income-driven plans if you are reporting joint income.
Why? Because to qualify for the Income-Based Repayment plan and 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 would typically reduce your student loan bill on an income-driven plan compared to filing jointly.
Another option is to consider an Income-Contingent Repayment (ICR) plan, 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 Federal Student Aid: “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 specific 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 may not offer this. 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 you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin).
Your spouse may also be responsible for your student loans if they are in default, and you have no wages to garnish.
4. You Can’t Refinance or Consolidate Your Loans Jointly
If you want to refinance or consolidate both of your student loans into one convenient payment, think again. You cannot pursue consolidation for your federal loans as a couple—only as individuals. The same goes for refinancing student loans.
Couples can refinance or consolidate their student loans individually, but not together.
This might be for the best, though. Before July 1, 2006, married couples could consolidate both of their federal loans. However, as couples went from “I do” to “I don’t” and then divorced, consolidation presented a lot of issues.
The Higher Education Reconciliation Act of 2005 repealed this particular provision, so couples can no longer consolidate their loans. So, whether you think this is good or bad, currently it’s not possible to consolidate or refinance both of your student loans. I guess some things are better kept separate.
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 entering 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.
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