Student loans and marriage don’t have to be at odds. After all, nearly 70% of students graduate with loans, so it’s likely you or your spouse (or both) are bringing student debt into your relationship. But it is crucial to recognize the impact that debt may have when you’re ready to tie the knot.
If you or your spouse owe student loans, here’s what to know about student loans and marriage before you say “I do.”
Does marriage affect student loans?
Getting married can be a wonderful next step for couples, but it’s important to evaluate how you’re going to manage your student loans while married. Before entering into a legal union, you should understand how student loans and debt might affect your finances.
Before tying the knot, sit down and talk to your partner about how much debt you’re both bringing to the table. Avoiding this important conversation can only lead to friction later on, especially when it comes time for the financial milestones like buying a house or starting a family. The amount of debt you each have may affect the possibility of meeting other financial goals.
Owing a lot in student loans, for instance, can impact your debt-to-income (DTI) ratio. If your DTI is too high, you could struggle to qualify for a home loan. Or if you missed payments on your loans, your credit score could be poor, which would also make it difficult to get a loan or line of credit.
Here are a few other ways that marriage can affect student loans:
1. Your income-driven plan may change
2. Your spouse could be responsible for your loans
3. Not every lender allows you to refinance your student loans jointly
4. You might stop qualifying for the student loan interest deduction
5. Your spouse could help you with payments
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 your spouse’s income will be combined into one adjusted gross income. As a result, your bill could increase.
If you’re reporting joint income, you might not be eligible for certain income-driven plans. That’s because 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 in other ways, you could lose out on some student loan benefits.
One alternative is to file your taxes as “married filing separately,” which typically reduces your student loan bill on an income-driven plan compared with filing jointly. Note that the Revised Pay As You Earn (REPAYE) plan considers both incomes regardless of whether you file separately.
What’s more, filing separately could cost you other tax breaks that you get from filing jointly, meaning it wouldn’t necessarily be worth it. If you’re concerned about the financial implications of student loans and marriage, consult a tax specialist or financial expert to decide what’s best for your situation.
In certain circumstances, 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. If they don’t, they might try to collect the debt against the estate. So be sure to read the fine print.
If you go back to school and your spouse cosigns your loan, they will be legally responsible for your debt if you fail to make payments.
Even without cosigning, your spouse might be liable for your student loans. This is the case if you take out a student loan after you’re married and live in a community property state, such as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin. In the event you got divorced, you could be responsible for your partner’s debt if they incurred it during your marriage and you live in one of these states.
You could also be responsible for your spouse’s post-marriage loans if they go into default. In this situation, the government could try to garnish your wages or tax refund (if you filed jointly).
You cannot pursue consolidation for your federal loans as a couple — only as individuals.
However, some private lenders allow couples to consolidate loans. Ask a student loan refinancing lender you’re interested in if they have a policy allowing couples to consolidate their loans and refinance them to a lower interest rate.
While student loans can be a financial burden, they offer a small perk during tax season. If you paid student loan interest in the past year, you could be eligible for a tax deduction of up to $2,500.
However, you can only qualify for the student loan interest deduction if you make less than $85,000 in gross adjusted income. Once you’re married, you can only qualify if you make less than $170,000 jointly.
Even if you file your taxes separately, this $170,000 combined income threshold still applies. So if getting married means your joint income is higher than this cutoff, you’ll no longer be able to claim the student loan interest deduction.
While it’s easy to focus on the potential negative consequences of student loans and marriage, there could be a benefit: Your spouse might offer to chip in on payments. Whether or not you’re combining your income, you or your spouse might choose to help the other pay off their student loans.
Of course, this arrangement will be based on your own private agreement with each other. If you or your spouse borrowed the loans before you got married, neither is legally responsible for paying back the other person’s debt.
Look at the big picture, read the fine print and come up with a plan to manage the debt. Happily ever after is much more attainable when you’re both on the same financial page.
Rebecca Safier and Jackson Wise contributed to this report.